Mitigating disaster risks caused by carbon emissions

This paper presents a dynamic mitigation policy model incorporating the carbon cycle. As carbon stocks increase, mitigation spending increases. However, frequent disasters erode agents’ mitigation confidence, reducing mitigation spending and increasing consumption. The social costs of carbon and risk premiums follow a similar trend, changing with carbon stocks. •We analyze the endogenous carbon-related disaster arrival rate in endowment economy.•There is an inverse-hump relation between mitigation cost and carbon stock.•Social cost of carbon and risk premium follow the same trend as mitigation costs.•The risk-free rate is dominated by the jump risk of disaster arrival rate.