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Cumulative carbon emissions and economic policy: In search of general principles

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  • Dietz, Simon
  • Venmans, Frank

Abstract

We exploit recent advances in climate science to develop a physically consistent, yet surprisingly simple, model of climate policy. It seems that key economic models have greatly overestimated the delay between carbon emissions and warming, and ignored the saturation of carbon sinks that takes place when the atmospheric concentration of carbon dioxide rises. This has important implications for climate policy. If carbon emissions are abated, damages are avoided almost immediately. Therefore it is optimal to reduce emissions significantly in the near term and bring about a slow transition to optimal peak warming, even if optimal steady-state/peak warming is high. The optimal carbon price should start relatively high and grow relatively fast.

Suggested Citation

  • Dietz, Simon & Venmans, Frank, 2019. "Cumulative carbon emissions and economic policy: In search of general principles," Journal of Environmental Economics and Management, Elsevier, vol. 96(C), pages 108-129.
  • Handle: RePEc:eee:jeeman:v:96:y:2019:i:c:p:108-129
    DOI: 10.1016/j.jeem.2019.04.003
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    Citations

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    Cited by:

    1. Rick Van der Ploeg & Simon Dietz & Armon Rezai & Frank Venmans, 2020. "Are economists getting climate dynamics right and does it matter?," Economics Series Working Papers 900, University of Oxford, Department of Economics.
    2. Frederick Ploeg & Armon Rezai, 2019. "Simple Rules for Climate Policy and Integrated Assessment," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 72(1), pages 77-108, January.
    3. Rick Van der Ploeg & Armon Rezai, 2019. "Stranded Assets In The Transition To A Carbon-Free Economy," Economics Series Working Papers 894, University of Oxford, Department of Economics.
    4. Rick Van der Ploeg & Christoph Hambel & Holger Kraft, 2020. "Asset Pricing and Decarbonization: Diversification versus Climate Action," Economics Series Working Papers 901, University of Oxford, Department of Economics.
    5. Frederick Ploeg, 2018. "The safe carbon budget," Climatic Change, Springer, vol. 147(1), pages 47-59, March.
    6. Malik Curuk & Suphi Sen, 2018. "Climate Policy and Resource Extraction with Variable Markups and Imperfect Substitute," ifo Working Paper Series 278, ifo Institute - Leibniz Institute for Economic Research at the University of Munich.
    7. Reyer Gerlagh & Roweno J.R.K. Wan, 2018. "Optimal Stabilization in an Emission Permits Market," CESifo Working Paper Series 6950, CESifo.
    8. Larry S. Karp & Christian P. Traeger, 2018. "Prices versus Quantities Reassessed," CESifo Working Paper Series 7331, CESifo.
    9. van der Ploeg, Frederick & Rezai, Armon, 2020. "The risk of policy tipping and stranded carbon assets," Journal of Environmental Economics and Management, Elsevier, vol. 100(C).
    10. Robert J R Elliott & Ingmar Schumacher & Cees Withagen, 2020. "Suggestions for a Covid-19 post-pandemic research agenda in environmental economics," Discussion Papers 20-15, Department of Economics, University of Birmingham.
    11. Reyer Gerlagh & Veronica Lupi & Marzio Galeotti, 2018. "Family Planning and Climate Change," CESifo Working Paper Series 7421, CESifo.
    12. Niko Jaakkola & Antony Millner, 2020. "Nondogmatic Climate Policy," NBER Working Papers 27413, National Bureau of Economic Research, Inc.

    More about this item

    Keywords

    Carbon price; Climate change; Cumulative emissions; Peak warming; Social cost of carbon;

    JEL classification:

    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies

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