Abstract
The assumption that the economic growth seen in recent decades will continue has dominated the discussion of future greenhouse gas emissions and the mitigation of and adaptation to climate change. Given that long-term economic growth is uncertain, the impacts of a wide range of growth trajectories should be considered. In particular, slower economic growth would imply that future generations will be relatively less able to invest in emissions controls or adapt to the detrimental impacts of climate change. Taking into consideration the possibility of economic slowdown therefore heightens the urgency of reducing greenhouse gas emissions now by moving to renewable energy sources, even if this incurs short-term economic cost. I quantify this counterintuitive impact of economic growth assumptions on present-day policy decisions in a simple global economy-climate model (Dynamic Integrated model of Climate and the Economy (DICE)). In DICE, slow future growth increases the economically optimal present-day carbon tax rate and the utility of taxing carbon emissions, although the magnitude of the increase is sensitive to model parameters, including the rate of social time preference and the elasticity of the marginal utility of consumption. Future scenario development should specifically include low-growth scenarios, and the possibility of low-growth economic trajectories should be taken into account in climate policy analyses.
Highlights
Introduction“Prediction is very difficult, especially about the future.” Niels Bohr’s caution would surely apply to extrapolating long-term change in the size and composition of the economic system, as technical innovation and changing values and social structures are likely to change the controlling forces at least as Sustainability 2014, 6 much as they have changed in recent centuries
The assumption that the economic growth seen in recent decades will continue has dominated the discussion of future greenhouse gas emissions and the mitigation of and adaptation to climate change
Climate policy analyses must incorporate the full diversity of plausible future economic growth trajectories, including ones where economic growth slows or stops, as well as ones where economic growth continues in the context of technological and societal restructuring that allows massively increased production
Summary
“Prediction is very difficult, especially about the future.” Niels Bohr’s caution would surely apply to extrapolating long-term change in the size and composition of the economic system, as technical innovation and changing values and social structures are likely to change the controlling forces at least as Sustainability 2014, 6 much as they have changed in recent centuries. While diverse scenarios for economic growth, derived under different assumptions, have been used for different climate policy studies, they largely have in common that they assume a continuation of the rapid economic growth seen in the past century. Under these scenarios, per capita wealth a century or two in the future will be much greater than it is now. Using a simple economic model of the cost of climate change to estimate optimal emissions control trajectories, substantially more aggressive actions to reduce carbon emissions are justified if we assume slow economic growth in the coming centuries compared with scenarios assuming rapid economic growth. The overall goal is to explore the implications of low growth for climate policy in a risk assessment framework
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