Optimum Growth and Carbon Policies with Lags in the Climate System
AbstractWe study the effects of greenhouse gas emissions on optimum growth and environmental policy by using an expansion-in-varieties growth model with polluting non-renewable resources. Climate change harms the capital stock. Our main contribution is to introduce and extensively explore the naturally determined time lag between greenhouse gas emission and the damages due to climate change which proves to be crucial for the transition of the economy towards its steady state. The social optimum and optimal abatement policies are fully characterized. The inclusion of a green technology delays optimal resource extraction. The optimal tax rate on emissions is proportional to output. Poor understanding of the emissions dissusion process leads to suboptimal carbon taxes and suboptimal growth and resource extraction.
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Bibliographic InfoPaper provided by CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich in its series CER-ETH Economics working paper series with number 13/184.
Length: 30 pages
Date of creation: Nov 2013
Date of revision:
Non-Renewable Resource Extraction; Climate Policy; Optimum Growth; Pollution Di usion lag.;
Find related papers by JEL classification:
- Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters
- O11 - Economic Development, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
- Q52 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Pollution Control Costs; Distributional Effects; Employment Effects
- Q32 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Exhaustible Resources and Economic Development
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-11-09 (All new papers)
- NEP-DGE-2013-11-09 (Dynamic General Equilibrium)
- NEP-ENE-2013-11-09 (Energy Economics)
- NEP-ENV-2013-11-09 (Environmental Economics)
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