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Abstract
We construct a hybrid, economic indicator of the sustainability of global well-being, which
is more inclusive than existing indicators and incorporates an environmentally pessimistic,
physical constraint on global warming. Our methodology extends the World Bank’s
Adjusted Net Saving (ANS) indicator to include the cost of population growth, the benefit
of technical progress, and a much higher, precautionary cost of current CO2 emissions.
Future warming damage is so highly unknowable that valuing emissions directly is rather
arbitrary, so we use a novel, inductive approach: we modify damage and climate
parameters in the deterministic DICE climate-economy model so it becomes economically
optimal to control emissions in a way likely to limit warming to an agreed target, here 2°C.
If future emissions are optimally controlled, our ANS then suggests that current global
well-being is sustainable. But if emissions remain uncontrolled, our base-case ANS is
negative now and our corresponding, modified DICE model has an unsustained
development path, with well-being peaking in 2065. Current ANS on an uncontrolled path
may thus be a useful heuristic indicator of future unsustainability. Our inductive method
might allow ANS to include other very hard-to-value, environmental threats to global
sustainability, like biodiversity loss and nitrogen pollution.