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On Intergenerational Distribution of the Burden of Greenhouse Gas Emissions

Listed author(s):
  • Lugovoy, O.

    (Russian Presidential Academy of National Economy and Public Administration, Moscow, Russia)

  • Polbin, A.

    (Russian Presidential Academy of National Economy and Public Administration, Moscow, Russia
    Gaidar Institute for Economic Policy, Moscow, Russia)

In this paper we propose an extension to the Dynamic Integrated model of Climate and Economy (DICE) by William Nordhaus, where we introduce overlapping generations (OLG) in the original model, and consider competitive equilibrium with the government, which follows Ramsey optimal policy on greenhouse gases (GHG) emissions reduction. In this framework it is possible to distinguish between subjective discount rate of individuals and social discount rate of the government. Thus the model provides two discount rates in the OLG model: the social discount rate under which cost-benefits analysis of climate projects are evaluated and the market discount rate for investments in physical capital. Using numerical simulations methods we show that the introduction of overlapping generations in the model could streamline more and early GHG emissions reduction, without causing a significant impact on the return on capital market. Long term gain from this policy is approximately 1 B C.

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Article provided by New Economic Association in its journal Journal of the New Economic Association.

Volume (Year): 31 (2016)
Issue (Month): 3 ()
Pages: 12-39

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Handle: RePEc:nea:journl:y:2016:i:31:p:12-39
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