Decomposing the integrated assessment of climate change

We present a decomposition approach for integrated assessment modeling of climate policy based on a linear approximation of the climate system. In our formulation the economic and natural science components are processed independently on different time scales. Turnpike properties of the Ramsey growth model can be exploited to provide a precise representation of post-terminal emissions and to reduce the economic horizon required to accurately approximate transition paths. Germaine to the economic assessment of climate policies, our decomposition accommodates formulation of the economic model in a complementarity format and thereby provides a means of incorporating second-best effects that are not easily represented in an optimization model. (C) 2006 Elsevier B.V. All rights reserved.