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Stabilizing the Global Climate: A Simple and Robust Benefit-Cost Analysis

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  • John Quiggin

Abstract

Most models of optimal climate change policy are complex and opaque. In this paper, it is argued that the convexity of climate damage and mitigation cost function provides a basis for the derivation of simple and robust estimates of optimal stabilization targets and carbon prices. For all but a few extreme assumptions, the optimal carbon price is between $40 and $75. Similarly, for a wide range of parameter values the optimal target is between 425 ppm and 475 ppm. In all simulations, the total cost of mitigation is below 5 per cent of income, and in most cases substantially below.
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Suggested Citation

  • John Quiggin, 2012. "Stabilizing the Global Climate: A Simple and Robust Benefit-Cost Analysis," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 94(2), pages 291-300.
    • Handle: RePEc:oup:ajagec:v:94:y:2012:i:2:p:291-300
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    File URL: http://hdl.handle.net/10.1093/ajae/aar130
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    References listed on IDEAS

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    1. Martin L. Weitzman, 2007. "A Review of the Stern Review on the Economics of Climate Change," Journal of Economic Literature, American Economic Association, vol. 45(3), pages 703-724, September.
    2. John Quiggin, 2012. "Equity Between Overlapping Generations," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 14(2), pages 273-283, March.
    3. Stern,Nicholas, 2007. "The Economics of Climate Change," Cambridge Books, Cambridge University Press, number 9780521700801.
    4. William D. Nordhaus, 2007. "A Review of the Stern Review on the Economics of Climate Change," Journal of Economic Literature, American Economic Association, vol. 45(3), pages 686-702, September.
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    Cited by:

    1. Hjort, Ingrid, 2016. "Potential Climate Risks in Financial Markets: A Literature Overview," Memorandum 01/2016, Oslo University, Department of Economics.
    2. John Quiggin, 2013. "Is it too late to stabilise the global climate?," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 57(1), pages 1-14, January.
    3. Quiggin, John, 2013. "Carbon pricing and the precautionary principle," Risk and Sustainable Management Group Working Papers 152098, University of Queensland, School of Economics.
    4. Quiggin, John, 2013. "How I learned to stop worrying and love the RET," Risk and Sustainable Management Group Working Papers 152099, University of Queensland, School of Economics.
    5. Carlos Mario Gómez Gómez & C. D. Pérez-Blanco & David Adamson & Adam Loch, 2018. "Managing Water Scarcity at a River Basin Scale with Economic Instruments," Water Economics and Policy (WEP), World Scientific Publishing Co. Pte. Ltd., vol. 4(01), pages 1-31, January.
    6. John Quiggin & David Adamson & Daniel Quiggin (ed.), 2014. "Carbon Pricing," Books, Edward Elgar Publishing, number 15448.

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    More about this item

    JEL classification:

    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy
    • Q52 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Pollution Control Adoption and Costs; Distributional Effects; Employment Effects

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