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Sustainability 2014, 6(3), 1448-1461; doi:10.3390/su6031448
Article

Economic Growth Assumptions in Climate and Energy Policy

Received: 11 December 2013; in revised form: 6 March 2014 / Accepted: 7 March 2014 / Published: 19 March 2014
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Abstract: The assumption that the economic growth seen in recent decades will continue has dominated the discussion of future greenhouse gas emissions and the mitigation of and adaptation to climate change. Given that long-term economic growth is uncertain, the impacts of a wide range of growth trajectories should be considered. In particular, slower economic growth would imply that future generations will be relatively less able to invest in emissions controls or adapt to the detrimental impacts of climate change. Taking into consideration the possibility of economic slowdown therefore heightens the urgency of reducing greenhouse gas emissions now by moving to renewable energy sources, even if this incurs short-term economic cost. I quantify this counterintuitive impact of economic growth assumptions on present-day policy decisions in a simple global economy-climate model (Dynamic Integrated model of Climate and the Economy (DICE)). In DICE, slow future growth increases the economically optimal present-day carbon tax rate and the utility of taxing carbon emissions, although the magnitude of the increase is sensitive to model parameters, including the rate of social time preference and the elasticity of the marginal utility of consumption. Future scenario development should specifically include low-growth scenarios, and the possibility of low-growth economic trajectories should be taken into account in climate policy analyses.
Keywords: climate policy; energy policy; global warming; optimization; economic growth climate policy; energy policy; global warming; optimization; economic growth
This is an open access article distributed under the Creative Commons Attribution License which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.

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MDPI and ACS Style

Krakauer, N.Y. Economic Growth Assumptions in Climate and Energy Policy. Sustainability 2014, 6, 1448-1461.

AMA Style

Krakauer NY. Economic Growth Assumptions in Climate and Energy Policy. Sustainability. 2014; 6(3):1448-1461.

Chicago/Turabian Style

Krakauer, Nir Y. 2014. "Economic Growth Assumptions in Climate and Energy Policy." Sustainability 6, no. 3: 1448-1461.


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