Spectral Policy: Optimal Climate Strategies When Stability Itself Is a Public Good

Abstract

This paper introduces a framework for climate policy design that shifts the focus from simply reducing emissions to actively managing the climate system's structural stability. The central argument is that the climate's resonance gap—a measure of its spectral coherence—functions as a public good that depreciates with emissions, and policy must be designed to keep this gap above a critical threshold to prevent catastrophic regime shifts. The framework formulates optimal policy as a constrained control problem, minimizing social costs while maintaining spectral stability. This yields several important insights. First, carbon prices should follow a spectral correction to the Hotelling rule: when the stability gap is shrinking, prices must rise faster than the standard economic rule would suggest. Second, optimal carbon taxes can follow an inverse-U-shaped path—rising slowly or declining initially, then accelerating as the gap narrows. Third, R&D subsidies should be front-loaded when the gap is large, as early technological investment provides the greatest returns. For cap-and-trade systems, a price corridor emerges naturally from the stability constraint. The paper extends the framework internationally, showing that self-enforcing climate agreements require adaptive mechanisms that adjust national targets based on the global stability gap. Carbon border adjustments should account for gap differentials between trading partners. Under deep uncertainty about future gap dynamics, the robust policy is more conservative than certainty-equivalent approaches. The framework also addresses equity concerns, noting that the spectral premium may disproportionately affect low-income households, requiring revenue recycling or targeted transfers. Numerical simulations show that spectral policy reduces the probability of stability collapse by a factor of three compared to business-as-usual, at a welfare cost of approximately 1.6% of GDP.