Mitigation and the geoengineering threat

•The paper introduces geoengineering in a strategic framework with asymmetric countries.•The framework is simple but captures all the nuances of the problem.•Asymmetric damages from climate change and geoengineering are studied.•Contrary to the usual results, abatement levels can be inefficiently high with geoengineering.•The framework can be expanded to analyze other climate change questions.

Recent scientific advances have introduced the possibility of engineering the climate system to lower ambient temperatures without lowering greenhouse gas concentrations. This possibility has created an intense debate given the ethical, moral and scientific questions it raises. This paper examines the economic issues introduced when geoengineering becomes available in a standard model where strategic interaction leads to suboptimal mitigation. Geoengineering introduces the possibility of technical substitution away from mitigation, but it also affects the strategic interaction across countries: mitigation decisions directly affect geoengineering decisions. With similar countries, I find these strategic effects create greater incentives for free-riding on mitigation, but with asymmetric countries, the prospect of geoengineering can induce inefficiently high levels of mitigation.