(
2011-11)
Goeschl, Timo; Heyen, Daniel; Moreno-Cruz, Juan
The impacts of long-lived stock pollutants and the abatement and technology measures supposed to address them link current and future generations together. Altruism towards successor generations is a prerequisite for resolving the resulting intergenerational equity issues. Preference asymmetry and typical imperfections of altruism, however, introduce the possibility of important strategic conficts between generations. We develop a simple model highlighting the presence and nature of strategic distortions in addressing intergenerational environmental problems. The current generation decides on a combination of abatement and technology- enabling investment leading to an imperfect backstop technology. The future generation decides whether to use the backstop or not. We identify three possible outcomes: (1) Technology denial, in which the current generation deliberately rejects the imperfect backstop in anticipation that the future generation will use the technology in an undesired way. (2) Underabatement, in which the current generation provides the backstop to the future generation but reduces abatement activities; and (3) Overabatement, in which the current generation provides the backstop to the future generation but reduces abatement activities. The outcome depends non-trivially on the environmental preferences of the future generation. Uncertainty over future preferences renders technology denial more likely.
Solar Radiation Management (SRM) has two characteristics that make it an attractive means for managing climate risk: it is quick and it is cheap. SRM cannot, however, exactly offset CO₂-driven climate change, and its use introduces novel climate and environmental risks. We introduce SRM in a simple economic model of climate change that is designed to explore the interaction between uncertainty in both the climates response to CO2 and the risks of SRM. We find that the fact that SRM can be implemented quickly makes it a valuable tool to manage climate risks, even if it is relatively ineffective at compensating for CO₂-driven climate change or if its costs are large compared to traditional abatement strategies. Uncertainty about SRM is high, and decision makers must decide whether or not to commit to research that might reduce this uncertainty. We find that even modest reductions in uncertainty about the side-effects of SRM can reduce the overall costs of climate change in the order of 10%.
Recent scientific advances have introduced the possibility of engineering the climate system to lower ambient temperatures without lowering greenhouse gas concentrations. This possibility has created an intense debate given the ethical, moral and scientific questions it raises. This paper examines the economic issues introduced when geoengineering becomes available in a standard two-period two-country model where strategic interaction leads to suboptimal mitigation. Geoengineering introduces the possibility of technical substitution away from mitigation, but it also affects the strategic interaction across countries: mitigation decisions directly affect geoengineering decisions. With similar countries, I find these strategic effects create greater incentives for free-riding on mitigation, but with asymmetric countries, the prospect of geoengineering can induce inefficiently high levels of mitigation.