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William Nordhaus’s Optimal Carbon Tax Trajectory

In: The Economics of Optimal Growth Pathways

Author

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  • S. Niggol Seo

    (Muaebak Institute of Global Warming Studies)

Abstract

This chapter sets forth the concept of a globally harmonized optimal carbon price trajectory which is integrated into a socially optimal economic growth pathway. The Dynamic Integrated Climate and Economy (DICE) model developed by Nordhaus is an integrated assessment model that links the global economy with the geophysical processes of the planet. The DICE model expands Koopmans’s economic growth model significantly but also demonstrates the power of Koopmans’s conceptual framework on economic growth. The price of carbon dioxide, which is the primary output of the DICE model, points to the world economy how to cut efficiently greenhouse gas emissions which is the primary cause of planetary warming. This is achieved by balancing the cost of abatement of carbon dioxide emissions and the flow of damage over time of unabated carbon dioxide emissions on the planet, taking into account the present and future technologies. The price of carbon dioxide calculated by the DICE model is the social cost of carbon dioxide.

Suggested Citation

  • S. Niggol Seo, 2023. "William Nordhaus’s Optimal Carbon Tax Trajectory," Springer Books, in: The Economics of Optimal Growth Pathways, chapter 0, pages 235-264, Springer.
    • Handle: RePEc:spr:sprchp:978-3-031-20754-9_11
    DOI: 10.1007/978-3-031-20754-9_11
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