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Designing an Optimal 'Tech Fix' Path to Global Climate Stability: Directed R&D and Embodied Technical Change in a Multi-phase Framework

This paper reports research focused on the inter-temporal resource allocation requirements of a program of technological changes that would halt global warming by completing the transition to a "green" production regime (i.e., zero net CO2-emissions) within the possibly brief finite interval that remains before Earth's climate is driven beyond a catastrophic tipping point. We formulate a multi-phase, just-in-time transition model incorporating carbon-based and carbon-free technical options that require physical embodiment in durable production facilities, and whose performance attributes can be enhanced by investment in directed R&D. Transition paths indicating the best ordering and durations of the distinct phases during which intangible and tangible capital formation is taking place and capital stocks of different types are being utilized in production (or scrapped when replaced types embodying socially more efficient technologies) are obtained as optimal solutions for each of a trio of related models in which the global macro-economy's dynamics are coupled with the dynamics of the climate system. The climate-integrated (annual) discrete-time endogenous growth models envisage the implementation of different technology policy options, but, for comparability of their solutions, all three are calibrated to emulate the same global settings of the "transition planning" problem. Our dynamic integrated requirements analysis modeling (DIRAM) approach exposes the sensitivity of the specifics of alternative "tech fix" transition paths to parametric variations in key exogenous specifications. Of particular interest among the latter is the conjectured location of a pair of successive climate "tipping points", the first of which initiates higher expected rates of damage to the carbon-fueled capital stock due to more frequent extreme weather events being driven by the rising mean global temperature. The second, far more dangerous tipping point (at a still higher MGT) corresponds to the lowest conjectured level of atmospheric CO2 concentration that could trigger an irreversible climate catastrophe. Having to stop short of that point, in effect sets a "minimal regret" carbon budget for the optimal transition to a sustainable phase of global economic growth. Sensitivity analysis results are displayed to show how varying the catastrophic tipping point (and its implied carbon budget) alters the transition dynamics in each of the three models.

Paul David
Adriaan Van Zon
Publication Date
August, 2016