We develop a model of optimal carbon taxation and redistribution taking into account horizontal equity concerns by considering heterogeneous energy efficiencies. By deriving first- and second-best rules for policy instruments including carbon taxes, transfers and energy subsidies, we then...

Though climate physical and transition risks will likely affect socio-economic dynamics along any transition pathways, their unfolding is still poorly understood. This also affects the development of climate-change policies to achieve sustainable growth. In this paper, we discuss a series of...

The extent of future climate change is a policy choice. Using an integrated climate-economy assessment model, we estimate climate policy curves (CPCs) that link the price of carbon dioxide (CO2) to subsequent global temperatures. The resulting downward sloping CPCs quantify the inverse...

Climate change not only impacts production and market consumption, but also the relative scarcity of non-market goods, such as environmental amenities. We study fundamental drivers of the resulting relative price changes, their potential magnitude, and their implications for climate policy in...

It is well established that adaptation and technological investment in each case may serve as a commitment device in international climate politics. This paper for the first time analyzes the combined impact of these two strategic variables on global mitigation within a noncooperative framework...

The ability of private interests to influence the political process is an important topic in economics and political science. While some of these efforts appear as campaign finance and lobbying expenditures in the official record, private interests may also engage in "covert" influence through...

We develop a dynamic model where heterogeneous firms take investment decisions depending on their beliefs on future carbon prices. A policy-maker announces a forward-looking carbon price schedule but can decide to default on its plans if perceived transition risks are high. We show that weak...

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...

A central issue that is discussed in climate policy is the fear of owners of stocks of fossil hydrocarbon deposits that high CO2 taxes and bans on the combustion use of hydrocarbons will turn their stocks into stranded assets. They might react by extracting and selling their reserves today: a...

Interest rates are central determinants of saving and investment decisions. Costly financial intermediation distort these price signals by creating a spread between the interest rates on deposits and loans with substantial effects on the supply of funds and the demand for credit. This study...