Dynamic Analysis of Global Warming
The problems of global warming are genuinely dynamic. From past human activities we inherit an excess concentration of atmospheric carbon dioxide, and the choices we make today concerning the use of fossil fuels and related activities significantly affect all future generations through the phenomenon of global warming, which is brought about by the atmospheric concentrations of carbon dioxide due to the combustion of fossil fuels today. Thus, we have to take into account explicitly the changes in the welfare levels of all future generations caused by the increases in the atmospheric accumulations of carbon dioxide. The degree of uncertainty involved with these phenomena is too great to be subject to any objective analysis. We take instead a simplistic approach that all future paths are known for certain and derive several propositions concerning policy and institutional arrangements to bring about dynamically optimal patterns of intertemporal resource allocation. We need further analysis to see if the basic nature of our conclusions will apply to the more general circumstances governed by a high degree of uncertainty and unpredictability.
In this chapter, we examine the dynamic analysis of global warming and, as in the previous chapters, various carbon tax schemes, focusing on the implications for the processes of capital accumulation and the welfare of future generations.