Economic growth and social welfare with global regime-switching environmental thresholds
(English)Manuscript (preprint) (Other academic)
Scientific evidence indicates that human development faces multiple and interacting regime-switching environmental thresholds such as climate change, ocean acidification and biodiversity loss. And crossing one or more such thresholds would trigger rapid and large changes in our life-support system with widespread consequences. This paper attempts to study the effects of such thresholds on human well-being in a growth theoretical framework. We derive the accounting prices of pollution stocks such as the concentration of greenhouse gases for the risk of triggering catastrophic events, which are needed for conducting a dynamic cost-benefit analysis. We first analyze a simple model with a single threshold and then extend it to a planar system with correlated double thresholds with a joint probability distribution. the results can be applied for analyzing global climate change and ocean acidification risks, which are highlighted in a Nature article by Rockström et al. (2009).
IdentifiersURN: urn:nbn:se:uu:diva-222692OAI: oai:DiVA.org:uu-222692DiVA: diva2:712044