arXiv subjects

Fangzhi Wang

Publications and source records attributed to Fangzhi Wang.

5 recordsLinked to original sources

arXiv2026

AI worsens climate change, integrated assessment shows

Artificial intelligence (AI) interacts with climate in various ways, while a unified analytical framework of this intricate interplay is lacking. To align AI investment with climate policy, we propose such a framework integrating AI's impact on emissions, output, and climate damages into the DICE model. We distinguish between ICT-like and Industrial Revolution (IR)-like AI prospects. Calibrated to the best available evidence, we find that AI development is net polluting. Under current low abatement, ICT-like AI adds 0.1 degree C to 2100 warming, while IR-like AI adds 0.8 degree C. The associated climate costs offset roughly one-fifth and one-quarter of AI's economic gains, respectively. Meeting the 2 degree C target saves the optimal ICT(IR)-like AI investment rate by 2100 from 3.3% (5.1%) under the low-abatement scenario to 3.7% (12.7%), indicating that mitigation is complementary to AI development. We further show that the investment trade-off between AI and abatement is driven primarily by AI's economic prospects, not by its emissions footprint.

econ.GN↗

arXiv2026

The Weitzman Premium on the Social Cost of Carbon

Preference heterogeneity massively increases the social cost of carbon. We call this the Weitzman premium. Uncertainty about an exponential discount rate implies a hyperbolic discount rate, which in the near term is equal to the average discount rate but in the long term falls to the minimum discount rate. We generalise Weitzman's (2001, AER) gamma discounting to zero-inflation and two dimensions but find that the analytical solution is a poor approximation of the non-parametric heterogeneity. We calibrate the pure rate of time preference and the inverse of the elasticity of intertemporal substitution of 79,273 individuals from 76 countries and compute the corresponding social cost of carbon. Compared to the social cost of carbon for average time preferences, the average social cost of carbon is 6 times as large in the base calibration, and up to 200 times as large in sensitivity analyses.

econ.GN↗

arXiv2024

Towards a representative social cost of carbon

The majority of estimates of the social cost of carbon use preference parameters calibrated to data for North America and Europe. We here use representative data for attitudes to time and risk across the world. The social cost of carbon is substantially higher in the global north than in the south. The difference is more pronounced if we count people rather than countries.

econ.GN↗

arXiv2023

Endogenous preference for non-market goods in carbon abatement decision

Carbon abatement decisions are usually based on the implausible assumption of constant social preference. This paper focuses on a specific case of market and non-market goods, and investigates the optimal climate policy when social preference for them is also changed by climate policy in the DICE model. The relative price of non-market goods grows over time due to increases in both relative scarcity and appreciation of it. Therefore, climbing relative price brings upward the social cost of carbon denominated in terms of market goods. Because abatement decision affects the valuation of non-market goods in the utility function, unlike previous climate-economy models, we solve the model iteratively by taking the obtained abatement rates from the last run as inputs in the current run. The results in baseline calibration advocate a more stringent climate policy, where endogenous social preference to climate policy raises the social cost of carbon further by roughly 12%-18% this century. Moreover, neglecting changing social preference leads to an underestimate of non-market goods damages by 15%. Our results support that climate policy is self-reinforced if it favors more expensive consumption type.

econ.GN↗

arXiv2023

Baumol's Climate Disease

We investigate optimal carbon abatement in a dynamic general equilibrium climate-economy model with endogenous structural change. By differentiating the production of investment from consumption, we show that social cost of carbon can be conceived as a reduction in physical capital. In addition, we distinguish two final sectors in terms of productivity growth and climate vulnerability. We theoretically show that heterogeneous climate vulnerability results in a climate-induced version of Baumol's cost disease. Further, if climate-vulnerable sectors have high (low) productivity growth, climate impact can either ameliorate (aggravate) the Baumol's cost disease, call for less (more) stringent climate policy. We conclude that carbon abatement should not only factor in unpriced climate capital, but also be tailored to Baumol's cost and climate diseases.

econ.TH↗