This note generalizes the Solow-Stiglitz efficiency condition for natural resources to the problem of fossil fuel extraction with a greenhouse effect. The generalized optimality condition suggests that the greenhouse effect implies overextraction in the sense of leaving future generations a...

World income grows fast without verifiable climate-change impacts on the economy. The growth spell can end if climate impacts turn real but this can take decades to learn. We develop a tractable stochastic climate-economy model with a hidden-state impact process to evaluate the contributions of...

This paper explains how, in the context of incomplete coordination among all countries, unilateral policies that might at first sight seem pro-green could actually turn out to harm the global environment. The free-riding motives and the difficulty of reaching an effective international...

The increase of fuel extraction costs as well as of temperature will make it likely that in the medium-term future technological or political measures against global warming may be implemented. In assessments of a current climate policy the possibility of medium-term future developments like...

Demand for oil is very price inelastic. Facing such demand, an extractive cartel induces the highest price that does not destroy its demand, unlike the conventional Hotelling analysis: the cartel tolerates ordinary substitutes to its oil but deters high-potential ones. Limit-pricing equilibria...

The optimal social cost of carbon is in general equilibrium proportional to GDP if utility is logarithmic, production is Cobb-Douglas, depreciation in 100% every period, climate damages as fraction of production decline exponentially with the stock of atmospheric carbon, and fossil fuel...

The Ramsey rule for the consumption rate of discount assumes a transfer of money of a (representative) agent at one point in time to the same agent at another point in time. Climate policy (implicitly) transfers money not just over time but also between agents. I propose three alternative...

Economists have analyzed potential for damages from climate change from theoretical analyses and with Integrated Assessment Models (IAMs). Analytical models typically write damages as a function of the carbon stock, while IAMs typically view damages as based on temperatures. In this paper, we...

Carbon dioxide emissions are a major force driving climate change. We construct scenarios of CO2 emissions from fossil energy until 2100 in Europe. Major innovations are first that economic growth is based on an endogenous economic growth model and second that we calibrate our model to...