Anthropogenic climate change in a descriptive growth model

This paper studies the effects of global warming in a descriptive model of endogenous growth. It is assumed that deviations from the pre-industrial global surface temperature negatively affect aggregate output. The paper studies the effects of varying the tax rate and of different abatement activities on the emission of greenhouse gases and on the growth rate. We study both effects for the long-run balanced growth rate and for the growth rate of GDP on the transition path. Using simulations, it is demonstrated that higher abatement activities may both reduce greenhouse gas emissions and lead to higher growth. Further, the second-best abatement share is computed and the corresponding growth rate as well as the social optimum.