Template-type: ReDif-Paper 1.0 
Author-Name: Zon, Adriaan van
Author-Email: adriaan.vanzon@maastrichtuniversity.nl
Author-workplace-name: UNU-MERIT & SBE, Maastricht University
Title: On the optimum timing of the global carbon-transition under conditions of 
	 extreme weather-related damages: further green paradoxical results  
Abstract: An optimal growth model is constructed in a context of irreversible 
	 investment in different concurrent production technologies in order to 
	 study the optimum timing of the various stages that can be identified in 
	 the transition from a carbon-based economy to a carbon-free economy. 
	 Such a transition is necessary to avoid runaway global warming. The 
	 model is based on the AK-model by Rebelo (1991) and uses multi-stage 
	 optimal control methods to illustrate the importance of the notion of 
	 capital goods as a produced means of production and as the physical 
	 carriers/manifestations of different technologies for the timing and 
	 intensity of the use of carbon-based and carbon-free technologies during 
	 a just-in-time transition. The transition needs to happen within a given 
	 cumulative emissions constraint in order to avoid runaway global warming 
	 and corresponding runaway welfare losses. It is shown that the 
	 expectation of extreme weather-related damages in such a setting may 
	 induce a welfare maximizing central planner to step-up carbon-based 
	 production rather than reducing such activity, for similar reasons as 
	 the green paradox arises. A further paradoxical result is that increases 
	 in the productivity of carbon-free technologies relative to carbon-based 
	 technologies do not necessarily imply an earlier phasing in of those 
	 carbon-free technologies, but rather allow for a more gradual (and more 
	 prolonged) transition towards a carbon-free future. Finally, it is shown 
	 that having a productive carbon-based production system facilitates the 
	 transition towards a carbon-free system, i.e. investment in carbon 
	 intensive technologies may be an effective instrument in securing a 
	 carbon-free future.
Keywords: Energy transition, global warming, climate tipping point, optimal timing
	 of investment and production, multi-stage optimal control
Classification-JEL: O10, O21, O44 
Series: UNU-MERIT Working Papers
Creation-Date: 20160225
Number: 2016-010
File-URL: https://unu-merit.nl/publications/wppdf/2016/wp2016-010.pdf
File-Format: application/pdf
File-Size: 275 kb
Handle: RePEc:unm:unumer:2016010