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Energy Balance Climate Models and the Spatial Structure of Optimal Mitigation Policies

Author

Listed:
  • Brock, William A.
  • Engstrom, Gustav
  • Xepapadeas, Anastasios

Abstract

We develop a one-dimensional energy balance climate model with heat transportation across locations. We introduce the concept of potential world GDP at time t, and we introduce, through the temperature function, spatial characteristics into the damage function which make damages latitude dependent. We solve the social planner’s problem and characterize the competitive equilibrium. We define optimal taxes on fossil fuels and profit taxes on firms that extract fossil fuels. Our results suggest that if the implementation of international transfers across latitudes is not possible, then optimal taxes are spatially non homogeneous and tend to be lower at the poor latitudes. The degree of spatial differentiation of optimal taxes depend on heat transportation. We also locate sufficient conditions for optimal mitigation policies to have rapid ramp-up initially and then decrease over time. By employing the properties of the spatial model and approximating solutions, we show how to study the impact of thermal transport across latitudes on welfare inequality.

Suggested Citation

  • Brock, William A. & Engstrom, Gustav & Xepapadeas, Anastasios, 2012. "Energy Balance Climate Models and the Spatial Structure of Optimal Mitigation Policies," Climate Change and Sustainable Development 121721, Fondazione Eni Enrico Mattei (FEEM).
    • Handle: RePEc:ags:feemcl:121721
    DOI: 10.22004/ag.econ.121721
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    Cited by:

    1. Desmet, Klaus & Rossi-Hansberg, Esteban, 2015. "On the spatial economic impact of global warming," Journal of Urban Economics, Elsevier, vol. 88(C), pages 16-37.
    2. Brock, William A. & Engstrom, Gustav & Xepapadeas, Anastasios, 2012. "Energy Balance Climate Models, Damage Reservoirs and the Time Profile of Climate Change Policy," Climate Change and Sustainable Development 122863, Fondazione Eni Enrico Mattei (FEEM).
    3. Moreno-Cruz, Juan & Taylor, M. Scott, 2017. "An energy-centric theory of agglomeration," Journal of Environmental Economics and Management, Elsevier, vol. 84(C), pages 153-172.

    More about this item

    Keywords

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    JEL classification:

    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

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