Decomposing Integrated Assessment Climate Change

35 Pages Posted: 8 Aug 2005 Last revised: 19 Aug 2008

See all articles by Christoph Böhringer

Christoph Böhringer

University of Oldenburg - Economic Policy; Centre for European Economic Research (ZEW)

Andreas Löschel

University of Muenster - Chair of Microeconomics, esp. Energy and Resource Economics

Thomas F. Rutherford

Centre for Energy Policy and Economics

Date Written: 2005

Abstract

We present a decomposition approach for integrated assessment modeling of climate policy based on a linear approximation of the climate system. Our objective is to demonstrate the usefulness of decomposition for integrated assessment models posed in a complementarity format. First, the complementarity formulation cum decomposition permits a precise representation of post-terminal damages thereby substantially reducing the model horizon required to produce an accurate approximation of the infinite-horizon equilibrium. Second, and central to the economic assessment of climate policies, the complementarity approach provides a means of incorporating second-best effects that are not easily represented in an optimization model.

Keywords: integrated assessment, decomposition, terminal constraints, optimal taxation

JEL Classification: C61, C63, D58, D61

Suggested Citation

Bohringer, Christoph and Löschel, Andreas and Rutherford, Thomas F., Decomposing Integrated Assessment Climate Change (2005). ZEW - Centre for European Economic Research Discussion Paper No. 05-007, Available at SSRN: https://ssrn.com/abstract=770724 or http://dx.doi.org/10.2139/ssrn.770724

Christoph Bohringer (Contact Author)

University of Oldenburg - Economic Policy ( email )

Centre for European Economic Research (ZEW) ( email )

D-68161 Mannheim
Germany
+49 6211235200 (Phone)
+49 6211235226 (Fax)

Andreas Löschel

University of Muenster - Chair of Microeconomics, esp. Energy and Resource Economics ( email )

Universitätsstr. 14-16
48143 Munster
Germany

HOME PAGE: http://www.wiwi.uni-muenster.de/eroe

Thomas F. Rutherford

Centre for Energy Policy and Economics ( email )

ETH-Zentrum
Zurich, CH-8092
United States
+41 (0)44/632 6359 (Phone)
+41 (0)44/632 1622 (Fax)

HOME PAGE: http://www.cepe.ethz.ch/

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