adam-bauer-34 / cap6

The Carbon Asset Pricing model - AR6 (CAP6) is a dynamical integrated assessment model that uses an asset pricing framework to compute the 'optimal' carbon price. Each component is up-to-date with the sixth assessment report by the IPCC.

The Carbon Asset Pricing model -- AR6 (CAP6)

Written by: Adam Michael Bauer

Affiliation: Department of Physics, University of Illinois at Urbana-Champaign, Loomis Laboratory, 1110 West Green St, Urbana, IL 61801, USA

To contact: adammb4 [at] illinois [dot] edu

Contents

1. Code description
2. Publication
3. Model
4. Directory overview
   1. main
   2. aux_notebooks
   3. src
   4. data
   5. notebooks
5. Copyright statement

Code description

This is the source code for the Carbon Asset Pricing model -- AR6 (CAP6). CAP6 features an updated climate model based off of an effective transient climate respone to emissions (TCRE), updated damage functions and cost curves based on estimates made from the IPCC’s sixth assessment report, new flexible emissions baselines based off of the shared socioeconomic pathways (SSPs), and new Jupyter notebooks making model output easily analyzable by the user. The code is also thoroughly commented (we hope), thus making it accessible for users wishing to modify it and use it in their own studies.

Publication

Working paper his here.

Model

CAP6 is a dynamical asset pricing model designed to calculate the optimal price path of CO₂ emissions. The code recursively solves for the economic utility, assuming Epstein-Zin preferences, within a path dependent binomial tree framework. See our paper for a full description of the model.

Directory overview

Main files

There are two "main" files. The first is main.py, which runs a single model run (or as many as you want). Which run you want to do is pulled from the desired_runs list in main.py (which, in turn, comes from research_runs.csv in the data directory).

The second "main" file is main_ensemble.py. This creates the "ensemble" model runs. Warning: this takes an insanely long time to run (order weeks) on a personal computer. We had a computing cluster at our disposal, which made this code managable (it still took 6-7 days).

aux_notebooks

This directory contains the various notebooks we used to calibrate different model components.

src

Contains the source code for the model. The "nuts and bolts", if you will.

data

This directory will contain the output of the model when it is run. It also contains research_runs.csv, which tells the "main" files what the model parameters are for a given run. Additionally, it contains calibration data, such as the data points for different damage functions, emissions baselines, and so on.

Notebooks

Each notebook in the top directory is an analysis notebook. These were used to create the figures in our publication. They come with varying levels of sloppiness.

Copyright statement

MIT License

Copyright (c) 2023 Adam Michael Bauer

Permission is hereby granted, free of charge, to any person obtaining a copy of this software and associated documentation files (the "Software"), to deal in the Software without restriction, including without limitation the rights to use, copy, modify, merge, publish, distribute, sublicense, and/or sell copies of the Software, and to permit persons to whom the Software is furnished to do so, subject to the following conditions:

The above copyright notice and this permission notice shall be included in all copies or substantial portions of the Software.

THE SOFTWARE IS PROVIDED "AS IS", WITHOUT WARRANTY OF ANY KIND, EXPRESS OR IMPLIED, INCLUDING BUT NOT LIMITED TO THE WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE AND NONINFRINGEMENT. IN NO EVENT SHALL THE AUTHORS OR COPYRIGHT HOLDERS BE LIABLE FOR ANY CLAIM, DAMAGES OR OTHER LIABILITY, WHETHER IN AN ACTION OF CONTRACT, TORT OR OTHERWISE, ARISING FROM, OUT OF OR IN CONNECTION WITH THE SOFTWARE OR THE USE OR OTHER DEALINGS IN THE SOFTWARE.