Abstract
In this paper, we extend the work of Goes, Tuana, and Keller (Climatic Change 2011; GTK) by reexamining the economic benefit, of aerosol geoengineering. GTK found that a complete substitution of geoengineering for CO2 abatement fails a cost-benefit test over a wide range of scenarios regarding (i) the probability that such a program would be aborted and (ii) the economic damages caused by geoengineering itself. In this paper, we reframe the conditions under which GTK assumed geoengineering would/could be used. In so doing, we demonstrate that geoengineering may pass a cost-benefit test over a wide range of scenarios originally considered by GTK.
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Notes
GTK used the discounting framework detailed in Newell and Pizer (2004). As Gollier and Weitzman (2010) have recently shown, this framework assumes there is an immediate and permanent dislocation in the return to capital. Gollier (2009) proved that if uncertainty in returns is transitory, for example, if it follows Geometric Brownian Motion, as assumed by Newell and Pizer (2004), then the term-structure of interest rates should be flat.
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Acknowledgements
The authors thank the Center for International Energy and Environmental Policy at the University of Texas for partially supporting this work. The authors also thank the Assistant Deputy Editor and three anonymous referees for their comments and suggestions regarding an earlier draft of this paper.
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Bickel, J.E., Agrawal, S. Reexamining the economics of aerosol geoengineering. Climatic Change 119, 993–1006 (2013). https://doi.org/10.1007/s10584-012-0619-x
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DOI: https://doi.org/10.1007/s10584-012-0619-x