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The social cost of carbon is the central economic measure for aggregate climate change damages and functions as a metric for optimal carbon prices. Previous literature shows that inequality significantly influences the level of the social cost of carbon, but mostly neglects a major source of...
Persistent link: https://www.econbiz.de/10012870643
We derive the optimal unilateral policy in a general equilibrium model of trade and climate change where one region of the world imposes a climate policy and the rest of the world does not. A climate policy in one region shifts activities—extraction, production, and consumption—in the other...
Persistent link: https://www.econbiz.de/10013314669
derive a general analytic formula for the “risk premium” governing the resulting climate policy. The formula generalizes … making under uncertainty. It clarifies the distinct roles of risk aversion, prudence, characteristics of the damage … formulation, and future policy response. We show that an optimal response to uncertainty substantially reduces the risk premium …
Persistent link: https://www.econbiz.de/10013217086
A two-tier climate club exploits the comparative advantage of large countries to mete out punishments through trade, while taking their capacity to resist punishment as a constraint. Countries outside the coalition price carbon at a fixed fraction of the average carbon price adopted within the...
Persistent link: https://www.econbiz.de/10014081042
The objective of this paper is to critically assess the use of simple rules for the social cost of carbon (SCC) that employ a rudimentary form of the Ramsey Rule. Two interrelated caveats apply. First, if climate change poses a serious problem, it is hard to justify an exogenous constant growth...
Persistent link: https://www.econbiz.de/10012892228
intergenerational inequality aversion and for risk aversion. If growth increases (reduces) intra-generational inequality, the SDR is …
Persistent link: https://www.econbiz.de/10013353389
price rises at the risk-adjusted interest rate. Adding damages leads to a higher carbon price that grows more slowly. But as …
Persistent link: https://www.econbiz.de/10013226653
I build a quantitative model of economic growth that can be used to evaluate the impact of environmental policy interventions on final-use energy consumption, an important driver of carbon emissions. In the model, energy demand is driven by directed technical change. Energy supply is subject to...
Persistent link: https://www.econbiz.de/10013300865
price, the equilibrium risk-free rate, and risk premia. Climate disasters, which are more likely to occur sooner as … temperature rises, significantly increase risk premia …
Persistent link: https://www.econbiz.de/10012825992
The optimal transition to a low-carbon economy must account for adjustment costs in switching from dirty to clean capital, technological progress, and economic and climatic shocks. We study the low-carbon transition using a dynamic stochastic general equilibrium model with emissions abatement...
Persistent link: https://www.econbiz.de/10014264872