  We build a novel stochastic dynamic regional integrated assessment model
(IAM) of the climate and economic system including a number of important
climate science elements that are missing in most IAMs. These elements are
spatial heat transport from the Equator to the Poles, sea level rise,
permafrost thaw and tipping points. We study optimal policies under cooperation
and noncooperation between two regions (the North and the Tropic-South) in the
face of risks and recursive utility. We introduce a new general computational
algorithm to find feedback Nash equilibrium. Our results suggest that when the
elements of climate science are ignored, important policy variables such as the
optimal regional carbon tax and adaptation could be seriously biased. We also
find the regional carbon tax is significantly smaller in the feedback Nash
equilibrium than in the social planner's problem in each region, and the North
has higher carbon taxes than the Tropic-South.
