Carbon Dioxide as a Risky Asset

Adam Michael Bauer, Cristian Proistosescu, Gernot Wagner

Research output: Contribution to journalArticlepeer-review


We develop a financial-economic model for carbon pricing with an explicit representation of decision making under risk and uncertainty that is consistent with the Intergovernmental Panel on Climate Change’s sixth assessment report. We show that risk associated with high damages in the long term leads to stringent mitigation of carbon dioxide emissions in the near term, and find that this approach provides economic support for stringent warming targets across a variety of specifications. Our results provide insight into how a systematic incorporation of climate-related risk influences optimal emissions abatement pathways.

Original languageEnglish (US)
Article number72
JournalClimatic Change
Issue number5
StatePublished - May 2024


  • Asset pricing
  • Climate policy
  • Climate risk
  • Cost of carbon

ASJC Scopus subject areas

  • Global and Planetary Change
  • Atmospheric Science


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