The model includes a base-case trajectory for emissions of greenhouse gases, expressed in CO2 equivalents, from which emissions can be reduced by two classes of abatement measures: energy conservation, which is represented as a low-cost decline over time to a lower limit in energy intensity (modeled as a logistic function); and fuel-switching, represented as the replacement of emitting capital equipment by higher-cost non-emitting equipment. Both classes of measures can be enacted at various levels.
Concentrations are modeled by a linear impulse-response function and global-average temperature by a simple model incorporating energy-balance and a simple ocean with upwelling and diffusion, which allows specification of various levels of climate sensitivity. Damages are modeled in two ways: either by specifying a maximum permissible change in global-average temperatures or by hypothesizing a simple convex damage function, whose parameters can be varied to match the assumptions of other work.
The Hammitt et al. model has been employed to examine two-period decision problems with one or two world regions. One study examined a single-actor sequential decision problem, in which current-period abatement decisions are revised in a future period, when uncertainty regarding climate sensitivity and maximum temperature has been resolved ( Hammitt, Lempert, and Schlesinger 1992). Another examined interactive decisions by two world regions, setting abatement strategies independently in the first period while knowing that in a future period, with more knowledge about sensitivity, they will abate to meet a specified temperature target with a fixed burden-sharing rule Hammitt 1995; Hammitt and Adams 1995).
The next section is The DICE Model.
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