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...

The social cost of carbon (SCC), commonly referred to as the carbon price, is the monetized damage from emitting one unit of CO2 to the atmosphere. The SCC is typically obtained from large-scale computational Integrated Assessment Models (IAMs) that consolidate interdisciplinary climate research...

For any emission trading system (ETS) with quantity-based endogenous supply of allowances, there exists a negative demand shock, e.g. induced by abatement policy, that increases aggregate supply and thus cumulative emissions. We prove this green paradox for a general model and then apply it to...

We develop a 2-period emission trading model for a stock pollutant with demand shocks resolving over time. We find precise conditions for efficiency of a stabilization mechanism where cumulative available permits decrease with excess supply in early periods. Our model describes the stabilization...

We develop a dynamic regulation game for a stock externality under asymmetric information and future market uncertainty. Within this framework, regulation is characterized as the implementation of a welfare-maximization program conditional on informational constraints. We identify the most...

For any emission trading system (ETS) with quantity-based endogenous supply of allowances, there exists a negative demand shock, e.g. induced by abatement policy, that increases aggregate supply and thus cumulative emissions. We prove this green paradox for a general model and then apply it to...