Overlapping generations versus infinitely-lived agent: The case of global warming

This chapter demonstrates that results from climate change models using the OLG approach can depend significantly on various economic and social conditions. Thereby, policy recommendations derived from OLG models can prove rather different from those resulting from conventional ILA models. This chapter presents the integrated assessment OLG model for the analysis of global warming ALICE 1.2, which allows for modeling a flexible interest rate and for incorporating various assumptions on demographic change and public institutions designed for the protection of the environment. Thus, ALICE 1.2 is particularly appropriate for providing policy makers with quantitative figures about the desirable and feasible reduction levels of carbon dioxide emissions.