ABSTRACT
This chapter examines prospective global carbon emissions over time under two alternatives: “business as usual,” and an “optimal” trajectory in view of the problem of global warming. The aggressive program of abatement is thus socially profitable. The benefit-cost ratio can reach much higher levels if even small probabilities of major catastrophes are incorporated. A corresponding approach to global warming would seek to identify the optimal time path for carbon emissions, rather than deciding for or against a particular emissions ceiling. On balance, the most useful approach to economic analysis of the greenhouse problem is probably to consider a plausible path for aggressive policy response and to determine whether it is socially efficient in the sense that appropriately discounted, risk-weighted benefits exceed costs. A corresponding approach to global warming would seek to identify the optimal time path for carbon emissions, rather than deciding for or against a particular emissions ceiling.
