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Economics and Climate Change: Integrated Assessment in a Multi-Region World

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  • John Hassler
  • Per Krusell

Abstract

This paper develops a model that integrates the climate and the global economy---an integrated assessment model---with which different policy scenarios can be analyzed and compared. The model is a dynamic stochastic general-equilibrium setup with a continuum of regions. Thus, it is a full stochastic general-equilibrium version of RICE, Nordhaus's pioneering multi-region integrated assessment model. Like RICE, our model features traded fossil fuel but otherwise has no markets across regions---there is no insurance nor any intertemporal trade across them. The extreme form of market incompleteness is not fully realistic but arguably not a decent approximation of reality. Its major advantage is that, along with a set of reasonable assumptions on preferences, technology, and nature, it allows a closed-form model solution. We use the model to assess the welfare consequences of carbon taxes that differ across as well as within oil-consuming and -producing regions. We show that, surprisingly, only taxes on oil producers can improve the climate: taxes on oil consumers have no effect at all. The calibrated model suggests large differences in views on climate policy across regions.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 17757.

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Date of creation: Jan 2012
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Publication status: published as John Hassler & Per Krusell, 2012. "Economics And Climate Change: Integrated Assessment In A Multi-Region World," Journal of the European Economic Association, European Economic Association, vol. 10(5), pages 974-1000, October.
Handle: RePEc:nbr:nberwo:17757

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References

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  1. John Hassler & Per Krusell & Conny Olovsson, 2012. "Energy-Saving Technical Change," NBER Working Papers 18456, National Bureau of Economic Research, Inc.
  2. Manne, Alan & Mendelsohn, Robert & Richels, Richard, 1995. "MERGE : A model for evaluating regional and global effects of GHG reduction policies," Energy Policy, Elsevier, vol. 23(1), pages 17-34, January.
  3. Mikhail Golosov & John Hassler & Per Krusell & Aleh Tsyvinski, 2011. "Optimal Taxes on Fossil Fuel in General Equilibrium," NBER Working Papers 17348, National Bureau of Economic Research, Inc.
  4. John Hassler & Per Krusell & Conny Olovsson, 2010. "Oil Monopoly and the Climate," American Economic Review, American Economic Association, vol. 100(2), pages 460-64, May.
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Blog mentions

As found by EconAcademics.org, the blog aggregator for Economics research:
  1. Economics and Climate Change: Integrated Assessment in a Multi-Region World
    by Christian Zimmermann in NEP-DGE blog on 2012-02-03 03:44:11
  2. Economics and Climate Change: Integrated Assessment in a Multi-Region World
    by Christian Zimmermann in NEP-DGE blog on 2012-02-03 03:44:11
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Cited by:
  1. Breinlich, Holger & Ottaviano, Gianmarco I.P. & Temple, Jonathan R.W., 2014. "Regional Growth and Regional Decline," Handbook of Economic Growth, in: Handbook of Economic Growth, edition 1, volume 2, chapter 4, pages 683-779 Elsevier.
  2. Gustav Engstrom & William Brock & Anastasios Xepapadeas, . "Spatial Climate-Economic Models in the Design of Optimal Climate Policies across Locations," DEOS Working Papers 1224, Athens University of Economics and Business.
  3. William Brock & Anastasios Xepapadeas & Athanasios Yannacopoulos, 2014. "Optimal Control in Space and Time and the Management of Environmental Resources," DEOS Working Papers 1402, Athens University of Economics and Business.
  4. Armon Rezai & Rick Van der Ploeg, 2014. "Robustness of a Simple Rule for the Social Cost of Carbon," CESifo Working Paper Series 4703, CESifo Group Munich.
  5. Armon Rezai & Frederick van der Ploeg, 2014. "Abandoning Fossil Fuel; How fast and how much?," OxCarre Working Papers 123, Oxford Centre for the Analysis of Resource Rich Economies, University of Oxford.
  6. Shkarlet, Serhiy & Petrakov, Iaroslav, 2013. "Environmental Taxation Evolution in Ukraine: Trends, Challenges and Outlook," MPRA Paper 45168, University Library of Munich, Germany, revised 18 May 2013.
  7. Ian Wing & Karen Fisher-Vanden, 2013. "Confronting the challenge of integrated assessment of climate adaptation: a conceptual framework," Climatic Change, Springer, vol. 117(3), pages 497-514, April.
  8. Michael Greenstone & B. Kelsey Jack, 2013. "Envirodevonomics: A Research Agenda for a Young Field," NBER Working Papers 19426, National Bureau of Economic Research, Inc.

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