Conference Agenda

To gain insights into the mechanisms that shape the interaction between economic growth and climate change, we analyze the simplified DICE through the lens of growth theory. We analytically show that this model exhibits a continuum of saddle-point stable steady states. This property carries over to a large set of (analytical and numerical) IAMs. Hence, initial conditions of stock variables, notoriously difficult to calibrate, matter for the long-run economic and climate outcomes. However, we also demonstrate that a numerically mis-specified initial stock of global capital has a significantly smaller impact on simulated future climate and economic outcomes than a mis-specification of the initial GHG stock in the atmosphere. These novel insights have important implications for understanding the consequences of delayed climate policy

implementation and the optimal carbon tax. We employ a calibrated model, solved numerically for the big transition, to show how a postponement of optimal climate policy implementation leads to a higher long-run temperature. We also show that the SCC-to-GDP ratio is in fact largely constant, despite transitional dynamics. However, its level depends strongly on the point in time the policy is implemented. Finally, we employ the setup to better understand the consequences of stronger TFP growth for the climate.