| A general model of global warming is developed and solved using dynamic optimization techniques. Building on a three factor general equilibrium model, socially optimal and market outcomes are contrasted. Fossil fuels are modelled as an essential, exhaustible resource; the extraction and use of fossil fuels in production in turn contributes to global warming. Global warming is modelled as a cumulative, negative externality on production, thus underlining the interdependence between environment and economy. It is demonstrated that the combination of the dynamics of resource extraction and CO... |
