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Climate Policy Curves: Linking Policy Choices to Climate Outcomes

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Listed:
  • Hänsel, Martin
  • Bauer, Michael
  • Drupp, Moritz
  • Wagner, Gernot
  • Rudebusch, Glenn

Abstract

The extent of future climate change is a policy choice. Using an integrated climate-economy assessment model, we estimate climate policy curves (CPCs) that link the price of carbon dioxide (CO2) to subsequent global temperatures. The resulting downward sloping CPCs quantify the inverse relationship between carbon prices and future temperatures and illustrate how climate policy choices determine climate outcomes. Our analysis can account for a variety of climate policies—for example, carbon or fuel taxes, emissions trading programs, green subsidies, and energy-efficiency regulations—all of which can be summarized by means of an effective CO2 price. Importantly, we also examine CPC uncertainty, for example, by perturbing the model’s equilibrium climate sensitivity to trace out the temperature range associated with a given CO2 price. Finally, based on the latest Intergovernmental Panel on Climate Change (IPCC) integrated-assessment model scenarios, we estimate an implicit CPC, which provides a high-level IPCC summary of the climate policy actions required to achieve global climate targets

Suggested Citation

  • Hänsel, Martin & Bauer, Michael & Drupp, Moritz & Wagner, Gernot & Rudebusch, Glenn, 2022. "Climate Policy Curves: Linking Policy Choices to Climate Outcomes," CEPR Discussion Papers 17703, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:17703
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    Cited by:

    1. is not listed on IDEAS
    2. Michael D. Bauer & Eric A. Offner & Glenn D. Rudebusch, 2023. "The Effect of U.S. Climate Policy on Financial Markets: An Event Study of the Inflation Reduction Act," CESifo Working Paper Series 10739, CESifo.
    3. Bretschger, Lucas, 2024. "Green Road is open: Economic Pathway with a carbon price escalator," Journal of Environmental Economics and Management, Elsevier, vol. 127(C).
    4. Roggenkamp, Hauke, 2025. "A comment on ‘growth and inequality in public good provision’: Testing the robustness and generalizability of dynamic public good games," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 115(C).

    More about this item

    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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