A Climate-Economy Model with Endogenous Carbon Intensity

Abstract

We develop a simple aggregate nonlinear model of global coupled climate-socioeconomic system and explore with model simulations possible futures with and without climate mitigation actions. Carbon emissions produced by the global economy cause global mean temperature rise that, in its turn, leads in the proposed modelling framework to increasing depreciation rate of physical capital slowing down or even reverting the economic growth. In a particular case of Business-as-Usual scenario, it is possible to derive exact analytical solution of the reduced model. Dependent on model parameters, Business-as-Usual scenario leads either to a collapse of modelled economy or, at best, to stagnation, while the mitigation scenario is characterized by sustainable growth of decarbonised economy at an affordable cost of mitigation actions.