Keywords: climate change, economic activity
Chapter 6: A simple endogenous model of economic activity and climate change
One problem that is common to the existing research on future climate change is the neglect of the forces of the market mechanism. In order to model the dynamic interaction between economic activities and the climate system, a dynamic two-sector general equilibrium model is constructed. This chapter is organised as follows. Section 6.2 describes the economic and natural environment, and Section 6.3 studies the competitive equilibrium. Section 6.4 analyses the properties of the law of motion of the global temperature. Sections 6.5 and 6.6 consider the equilibrium time-path of temperature under different conditions based on the results obtained in Section 6.4. Section 6.7 investigates the conditions under which a climatic chaos occurs, and Section 6.8 offers concluding remarks.