Solar geoengineering, uncertainty, and the price of carbon
10.11.2017
Garth Heutel (Department of Economics – Georgia State University, NBER); Juan Moreno-Cruz (School of Economics – Georgia Institute of Technology); Soheil Shayegh (Fondazione Eni Enrico Mattei)
Journal of Environmental Economics and Management, Volume 87, Pages 24-41
We consider the socially optimal use of solar geoengineering to manage
climate change and its implications for carbon emissions abatement
policy. We show that solar geoengineering is a substitute for
emissions abatement; optimal policy includes less abatement, by up to
eight percentage points, and has a lower carbon price, by up to fifteen
percent, than recommended by models that ignore solar geoengineering.
However, it is an imperfect substitute, since it reduces temperature
without reducing atmospheric or ocean carbon concentrations. Carbon
concentrations are higher but temperature is lower when allowing for
solar geoengineering. Ignoring geoengineering in climate models can
lead to welfare losses of up to 4 percent of GDP. Uncertainty over
climate sensitivity leads to more abatement and solar geoengineering,
while uncertainty over solar geoengineering damages leads to less
geoengineering.
We consider the socially optimal use of solar geoengineering to manage climate change and its implications for carbon emissions abatement policy. We show that solar geoengineering is a substitute for emissions abatement; optimal policy includes less abatement, by up to eight percentage points, and has a lower carbon price, by up to fifteen percent, than recommended by models that ignore solar geoengineering. However, it is an imperfect substitute, since it reduces temperature without reducing atmospheric or ocean carbon concentrations. Carbon concentrations are higher but temperature is lower when allowing for solar geoengineering. Ignoring geoengineering in climate models can lead to welfare losses of up to 4 percent of GDP. Uncertainty over climate sensitivity leads to more abatement and solar geoengineering, while uncertainty over solar geoengineering damages leads to less geoengineering.