...The optimal carbon tax reduces emissions from burning fossil fuel, both in the short and medium run. Furthermore, it brings forward the date that renewables take over from fossil fuel and encourages the market to keep more fossil fuel locked up. A renewables subsidy induces faster fossil fuel...

The paper derives the optimal carbon tax in closed-form from an integrated assessment of climate change. The formula shows how carbon, temperature, and economic dynamics quantify the optimal mitigation effort. The model's descriptive power is comparable to numeric models used in policy advising....

World income grows fast without verifiable climate-change impacts on the economy. The growth spell can end if climate impacts turn real but this can take decades to learn. We develop a tractable stochastic climate-economy model with a hidden-state impact process to evaluate the contributions of...