Econ Demog C175 Lab 5: Climate

1. (Solow review) Recall that in equilibrium, the "birth and death of capital lines" cross so
𝑎
that (𝑛 + 𝑑)𝑘 = 𝑠𝑦 = 𝑠𝑘
a. Use some algebra to solve for equilibrium value of k.

i.
b. Compare this to r-code for k[t] in the loop of the function. What if any differences
to do you see?
1
𝑠•𝐴(𝑡)•𝐷(𝑡)
i. R-code: 𝑘[𝑡] = ( 𝑑+𝑔𝐿𝑡(𝑡)
) 1−α

ii. Differences are: in the numerator 𝑠 is being multiplied to productivity,

𝐴(𝑡), and damages, 𝐷(𝑡); in the denominator, depreciation is being
added to the change in growth rate of population, 𝑔𝐿𝑡(𝑡) which
replaces 𝑛 from part a.
c. Let a = .3, d = .1, and s = .25. What will be the ratio of steady state capital per
person with a population growth rate of 0.25% to that of a population with growth
rate 0.5%? (These is roughly in line with the difference between the two scenarios
for 2010 to 2060.) Is this much of a difference? (1 sentence is fine.)

i.

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 ii. Since the ratio is 1.0348 which is approximately 1 when rounded, this
means there isn't much difference between the two growth rates of
.25% and .5%.
2. Zero population growth
a. Simulate zero population growth by modifying the "slow" scenario above.

i.
b. How much warming will there be? Is this more or less than the 2 degrees Celsius
that is considered dangerous?
i. This is more than 2 degrees celsius because, at the baseline 2100, it is
above 2 by 1.2 degrees.
3. How much decarbonization is necessary?
a. Try different rates of change of sigma (by varying the parameter "gsigma0") until
you find one that will keep the world temperature rise below 2 degrees. What
value is enough? (Optional: a sentence on whether these numbers seem realistic).
i. A value of gsigma0 = -.04 keeps the world temperate rise below 2
degrees (image below).

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 ii.
b. Why is Nordhaus's optimal trajectory higher than 2 degrees? A few sentences are
fine.
i. Nordhaus’s optimal trajectory is higher than 2 degrees because he
states that a target temperature of 1.5 degrees C to 2 degrees C is
infeasible because it requires negative emissions. He also mentions
that the cost-benefit optimum rise over 3 degrees.
4. There will clearly be a Tragedy of the Commons if each firm is allowed to make its own
independent judgment about how much carbon to emit. According to Nordhaus, why is it
not sufficient to let each country enforce its own carbon emissions policy on its own
firms? [1 or 2 sentences is fine.]
a. According to Nordhaus, the “free-riding problem” in which countries have
the tendency to seek their own national interests, as well as noncooperative
nationalist policies in the area of climate change leaves nations worse off. So
if each country were to set their own policies, they would basically set policies
that are better for them and not take into account what other countries’
policies are, leaving a tragedy in the commons meaning the incentives of
individuals aren't compatible with sustainability when rights are not defined.

Congratulations! You've finished Lab 5.

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