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The Time Value of Carbon in Bottom-Up Studies

WithKenneth R. Richards

In many climate change mitigation cost-effectiveness studies that do not develop endogenous shadow prices for the value of carbon it is necessary to determine the time value of reductions in carbon dioxide emissions. This paper examines the implications for the time value of carbon of exogenously specifying (1) the path of marginal damages over time, (2) the path of emissions over time, and (3) that the emissions path follow an optimal trajectory over time.