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Carbon Prices for the Next Thousand Years

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  • Reyer Gerlagh

    (Tilburg University)

Abstract

As changes in climate-related stocks have consequences spanning over centuries or possibly millennia to the future, to reconcile the discounting of such far-distant impacts and realism of the shorter-term decisions, hyperbolic time-preferences are considered in a climate-economy model. The results justify high carbon taxes as advocated by Stern while maintaining the realism of the macroeconomic outcome, thus providing a solution for the dilemma centering the carbon tax-discount rate debate.

Suggested Citation

  • Reyer Gerlagh, 2012. "Carbon Prices for the Next Thousand Years," Review of Environment, Energy and Economics - Re3, Fondazione Eni Enrico Mattei, August.
    • Handle: RePEc:fem:femre3:2012.08-03
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    More about this item

    Keywords

    Carbon Tax; Discounting; Climate Change; Inconsistent Preferences;
    All these keywords.

    JEL classification:

    • H43 - Public Economics - - Publicly Provided Goods - - - Project Evaluation; Social Discount Rate
    • H41 - Public Economics - - Publicly Provided Goods - - - Public Goods
    • D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth

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