The future of global warming: will it be emissions control or environmental damages?

Abstract

This paper explores the role of risk perceptions in influencing public policy related to global warming. It solves for the optimal paths for emissions, abatement and investment in pollution-eliminating research by incorporating perceived risks into public decision making. It also compares the impact of differential risk perceptions on international collaboration on carbon abatement. Key findings are that the perception of risks related to environmental damages and technological breakthroughs plays an important role in determining the level of mitigation efforts. A high level of perceived risk of environmental damages discourages investment in pollution-eliminating research as there are few benefits from eliminating pollution after damages are realized. Other options that allow for sequestering carbon from the atmosphere may still remain viable. Another key finding is that when it comes to effort sharing between nations, differential mitigation efforts are primarily caused due to the differences in abatement technology, benefits from emissions and research capabilities. However, such differences could be accentuated or mitigated depending upon the differences in risk perception of developed and developing countries.