Global Warming Economics in the Long Run: A Conceptual Framework

Economic models of climate change typically analyze its short-run effects, for example, up to the year 2100 or for a doubling of atmospheric CO₂. This is a potentially serious shortcoming since under a business-as-usual scenario, atmospheric CO₂ concentrations could more than quadruple. We introduce a framework that endogenously accounts for long-run climate change and examine the implications of alternative mitigation strategies: one in which the rates of annual emissions are reduced, and one that places absolute limits on the total amount of carbon released. We discuss alternative valuation frameworks, drawing on the debate surrounding the Stern Review.