TACKLING NEGATIVELY CORRELATED GLOBAL AND LOCAL EXTERNALITIES — AN ECONOMIC STUDY OF MULTIPLE GASES ISSUE IN CLIMATE CHANGE

In this paper, we examine the relationship between CO2 and SO2 (including carbonaceous aerosols) mitigations in a framework of correlated global and local externalities. The framework is set up in a revised RICE model [Nordhaus, WD and Z Yang (1996). A regional dynamic general-equilibrium model of alternative climate-change strategies. American Economic Review, 86(4), 741–765], which we labeled as the RICES model (stands for RICE with ${\rm \underline{S}ulfur}$). In RICES model, we pioneer the empirical modeling of negatively correlated global and local externalities through negative radiative forcing of aerosols. Through simulating different scenarios, we quantify the impacts of local pollution control efforts at mitigating SO2 emissions on climate change and indicate the policy implications of correlations between CO2 and SO2 emissions.