We start from the assumption that we're on the blue dot at the moment: which is to say, we're burning as much fossil fuel as we possibly can, consistent with making a fast buck. This is obviously a heavy idealisation but I think it is in principle trueish. And from this and smoothness assumptions, we can deduce that the shape of the marginal benefit curve of extra emissions is flat at the point we're at. And therefore we can deduce that as long as the shape of the marginal costs is negative, as we'd plausibly expect, then the "optimal" emissions - if all was accounted for - would be less than they are now.
This is little different from the familiar idea that "social cost of carbon" represents an uninternalised externality consequent on FF burning, and if costed in would reduce FF burning by increasing its costs. Although what this figure does it make it clearer that adding in SCC doesn't then reduce your "optimal" emissions to zero.
If we continue with ATTPs thoughts, we come to It’s already clear that there are economic (and other) benefits to emitting less than we otherwise could. Of course, this doesn’t tell us how much less we should emit, but it does tell us that some kind of optimal pathway involves some level of emission reductions. And here we hit the problems. Firstly, indeed, this kind of schematic gives us little clue as to how big the "optimal" reductions might be - indeed they might be trivial - and the Nordhaus stuff he inlines indicate an "optimal" pathway with apparently flatlining emissions; we've already talked about whether this is plausible or not. But there's also the problem that there's no control knob on the economy marked "FF burning", other than the one we're not prepared to use, carbon taxes2. And this is a problem because you only get to quote the "optimal" results if you do it in the optimal way. If you do it in a distinctly non-optimal way by subsidies and regulation, you get a non-optimal result.
1. Don't tell anyone, but PTB credits it to Tol. Look closer; his name is even on it.
2. Or cap-n-trade, which is worse.