Essays on Economic Modeling of Climate Change

Structural change in a two-sector model of the climate and the economy introduces issues concerning substitutability among goods in a two-sector economic growth model where emissions from fossil fuels give rise to a climate externality. Substitution is modeled using a CES-production function where the intermediate inputs differ only in their technologies and the way they are affected by the climate externality. I derive a simple formula for optimal taxes and resource allocation over time and highlight model sensitivity w.r.t the elasticity of substitution and distribution parameters. Energy Balance Climate Models and General Equilibrium Optimal Mitigation Policies develops a one-dimensional energy balance climate model with heat diffusion and anthropogenic forcing across latitudes driven by global fossil fuel use coupled to an economic growth model. Our results suggest that if the implementation of international transfers across latitudes are not possible or costly, then optimal taxes are in general spatially non-uniform and may be lower at poorer latitudes. Energy Balance Climate Models, Damage Reservoirs and the Time Profile of Climate Change Policy explores optimal mitigation policies through the lens of a latitude dependent energy balance climate model coupled to an economic growth model. We associate the movement of an endogenous polar ice cap with the idea of a damage reservoir being a finite source of climate related damages affecting the economy. The analysis shows that the introduction of damage reservoirs can generate multiple steady states and Skiba points. Assessing Sustainable Development in a DICE World investigates a method for assessing sustainable development under climate change in the Dynamic Integrated model of Climate and the Economy (DICE-2007 model). The analysis shows that the sustainability measure is highly sensitive to the calibration of the inter-temporal elasticity parameter and discount rate of the social welfare function