How to prepare for and adapt to a climate tipping point

Muttoni, M. (2022). How to prepare for and adapt to a climate tipping point. IIASA YSSP Report. Laxenburg, Austria: IIASA

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Abstract

Climate tipping points are abrupt regime shifts in the Earth’s climate systems that are
mainly driven by the anthropogenic increase in global mean temperature. Given the concrete possibility that increasingly frequent and severe climate-related catastrophes will negatively impact the world economy, how should we model our policies to optimally prepare for and adapt to such events?
We formulate a continuous-time version of the DICE model by W. Nordhaus, and include
a climate tipping point as a random instant whose hazard rate increases with the global mean temperature. The resulting model is a two-stage optimal control problem with a random switching time, that we then approach with the Maximum Principle for heterogeneous systems developed by V. M. Veliov (see Wrzaczek et al. [2020], Veliov [2008]). Among our results, we find analytical conditions for the optimal savings and emission abatement policy, and a decomposition of the growth rate of the social cost of carbon. Numerical simulations are provided for different tipping point scenarios.

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