In this paper, we extend the well known result that hyperbolically discounting agents tend to postpone costs into the future. In a simple model we show that, without commitment to the ex ante optimal plan, no investment in environmental protection is undertaken over the whole time horizon, no...

We analyze the use of patent protection as a new policy to direct technical change to clean technology. Contrary to popular belief, it is dirty (and not clean) innovations that should be excluded from patent protection to reduce emissions. In the shortrun, removing patent protection on dirty...

This paper analyzes the long-term investment decisions of firms that are regulated by an emissions tax and that perceive a degree of market power in their respective output markets. Firms invest in abatement equipment that is fixed over the medium term (e.g., buying a new generator). This paper...

Standard environmental economics prescribes policies which are optimal and implemented immediately. The paper argues that, in reality, environmental policy often deviates from the optimum and implementation is not deterministic but subject to major uncertainty and frequent change. We present a...

Under imperfect competition, the effect of a cap-and-trade system on indus- try profits depends on the type of abatement technology that is used by firms: industries that use process-integrated technologies are more affected than those using end-of-pipe abatement technologies. The interaction...

We derive the optimal contributions to global climate policy when countries differ with respect to income level and pollution intensity. Countries' growth rates are determined endogenously, and abatement efficiency is improved by technical progress. We show that country heterogeneity has a...

The paper develops the Basic Climate Economic (BCE) model featuring the core elements of climate economics and climate policy. The BCE model incorporates fossil stock depletion, pollution stock accumulation, endogenous growth, and climate-induced capital depreciation. We first use graphical...

We study the effect of a shock on firms’ costs in a general setting by considering both perfect and imperfect competition and a general cost function. We show that, counterintuitively, firms’ profits may increase with cost increases. We generalize Seade’s (1985) results by considering the...

We design a global refunding scheme as a new international approach to address climate change. A global refunding system allows each country to set its carbon emission tax, while aggregate tax revenues are partially refunded to member countries in proportion to the relative emission reductions...