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The tractable general equilibrium model developed by Golosov et al. (2014), GHKT for short, is modified to allow for stock-dependent fossil fuel extraction costs and partial exhaustion of fossil fuel reserves, a negative impact of global warming on growth, mean reversion in climate damages,...
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uncertainty about future climate policy is resolved. E.g. abandoning climate policy plans immediately boosts scarcity rent, market … investment in exploration capital with intertemporal adjustment costs, depletion of reserves and market capitalization, and … capitalization, exploration investment and discoveries. To explain and quantify these four effects, we use an analytical model of …
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