Economic Development and Emission Control over the Long Term: the Iclips Aggregated Economic Model

In integrated assessments of climate change, greenhouse-gas emissions and climate change impacts provide the linkages between the world economy and the climate system. Key climatic processes operate at the scales of centuries. This requires highly aggregated models for portraying the dynamics of the economic system. An extended Ramsey-type optimal growth model is presented as the appropriate tool to be integrated with a reduced-form climate model in the ICLIPS integrated assessment. The eleven-region model of the world economy involves exogenous population and endogenous investment dynamics with productivity progress based on a technological diffusion model. World regions are linked via intertemporal trade flows of the composite consumption/investment good, capital mobility, and emission permit trading. Coupled with the ICLIPS Climate Model, the Aggregated Economic Model can determine corridors of permitted long-term carbon emission paths or, as primarily discussed in this paper, specific cost-effective emission trajectories. The sensitivity of mitigation costs to externally specified climate change/impact constraints and to to assumptions about non-CO greenhouse-gas emissions flexibility is also discussed.