Climatic tipping points and optimal fossil fuel use

The economics of climate change is characterized by many uncertainties, including climate dynamics, economic damages and potentially irreversible climate catastrophes. Using an optimal growth model of a fossil-fuel driven economy subject to a climate externality and potentially irreversible climatic events, this paper contributes to the understanding of how the risk of such events impacts on optimal fossil-fuel over time. Catastrophic events are modelled as irreversible…

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