Climate Policy under Cooperation and Competition between Regions with Spatial Heat Transport

The paper builds a novel stochastic dynamic regional integrated assessment model (IAM) of the climate and economic system including a number of important climate science elements that are missing in most IAMs. These elements are spatial heat transport from the Equator to the Poles, sea level rise, permafrost thaw and tipping points. The paper studies optimal policies under cooperation and various degrees of competition between regions. The result suggests that when the elements of climate science which are accounted for in this paper are ignored, important policy variables such as the social cost of carbon and adaptation could be seriously biased.