SolACE - Solar Geoengineering in an Analytic Climate Economy

Abstract

Solar geoengineering is an affordable measure to counteract the global temperature
increase. We derive a simple policy rule for sulfur-based geoengineering
in a state of the art integrated assessment model of climate change.
We show how geoengineering affects optimal carbon taxation, deriving the
different components of the Pigovian tax. We show how the globally optimal
rational for geoengineering and carbon taxation changes in a dynamic Markov
game across regions. A quantitative simulation suggests a non-cooperative
equilibrium where China as a single mover reduces temperatures to the Paris
accord’s most stringent 1.5C target by 2100. It “free-drives” on the margin but all regions
apart from Russia free-ride in absolute terms. The simulated temperature increase peaks around 2165 exceeding the 2C target.

Keywords: solar geoengineering, climate change, dynamic games, social cost of carbon, carbon tax, free-riding, free-driving, integrated assessment

JEL Classification: C72, D62, H41, Q54