Climate change and endogenous growth theory: forecasting by the ADICE model

This paper presents a preliminary study of the effects of modelling endogenous technological progress in a climate-economic growth model. The endogenous path of the technological progress function is estimated with reference to the DICE model of Nordhaus (1994). The parameters are chosen so the resulting model minimizes the difference between the paths of exogenous and endogenous forecasts. The endogenous technological change function is then used to forecast the future paths of climate and economic variables. The results of the forecast are compared with the exogenous forecasting ADICE results. The results show that, without policy intervention, endogenous technological progress will generate higher levels of economic activity without any reduction in the level of emissions or environmental benefits.