Optimal Resource Allocation for Carbon Mitigation

Abstract

Climate change threatens economic and environmental stability and requires immediate action to prevent and counteract its impacts. As large investments are already going into mitigation efforts, it is crucial to know how to best allocate them in time and among the alternatives. In this work, we tackle this problem using optimal control methods to obtain the temporal profiles of investments and their allocation to either clean energy development or carbon removal technologies expansion. The optimal allocation aims to minimize both the abatement and damage costs for various scenarios and mitigation policies, considering the optimization time horizon. The results show that early investments and a larger share of demand satisfied by clean energy should be priorities for any economically successful mitigation plan. Moreover, less stringent constraints on abatement budgets and reduced discounting of future utility are needed for a more economically and environmentally sustainable mitigation pathway.