Coupling climate and economic models in a cost-benefit framework: A convex optimisation approach

Drouet, L.; Edwards, N. R.; Haurie, A. (2006). Coupling climate and economic models in a cost-benefit framework: A convex optimisation approach. Environmental Modeling & Assessment, 11(2), pp. 101-114. Springer 10.1007/s10666-006-9047-5

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In this paper, we present a general method, based on a convex optimisation technique, that facilitates the coupling of climate and economic models in a cost-benefit framework. As a demonstration of the method, we couple an economic growth model à la Ramsey adapted from DICE-99 with an efficient intermediate complexity climate model, C-GOLDSTEIN, which has highly simplified physics, but fully 3-D ocean dynamics. As in DICE-99, we assume that an economic cost is associated with global temperature change: this change is obtained from the climate model, which is driven by the GHG concentrations computed from the economic growth path. The work extends a previous paper in which these models were coupled in cost-effectiveness mode. Here we consider the more intricate cost-benefit coupling in which the climate impact is not fixed a priori. We implement the coupled model using an oracle-based optimisation technique. Each model is contained in an oracle, which supplies model output and information on its sensitivity to a master program. The algorithm Proximal-ACCPM guarantees the convergence of the procedure under sufficient convexity assumptions. Our results demonstrate the possibility of a consistent, cost-benefit, climate-damage optimisation analysis with a 3-D climate model.

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