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An Economic Anatomy of Optimal Climate Policy

Author

Listed:
  • Moreno-Cruz, Juan B.

    (Georgia Institute of Technology)

  • Wagner, Gernot

    (Harvard University)

  • Keith, David w.

    (Harvard University)

Abstract

This paper introduces geoengineering into an optimal control model of climate change economics. Together with mitigation and adaptation, carbon and solar geoengineering span the universe of possible climate policies. We show in the context of our model that: (i) a carbon tax is the optimal response to the unpriced carbon externality only if it equals the marginal cost of carbon geoengineering; (ii) the introduction of solar geoengineering leads to higher emissions yet lower tempera- tures, and, thus, increased welfare; and (iii) solar geoengineering,in effect, is a public goods version of adaptation that also lowers temperatures.

Suggested Citation

  • Moreno-Cruz, Juan B. & Wagner, Gernot & Keith, David w., 2017. "An Economic Anatomy of Optimal Climate Policy," Working Paper Series rwp17-028, Harvard University, John F. Kennedy School of Government.
    • Handle: RePEc:ecl:harjfk:rwp17-028
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    Cited by:

    1. Juan Moreno-Cruz & Anthony Harding, 2022. "A Unifying Theory of Foreign Intervention in Domestic Climate Policy," CESifo Working Paper Series 10172, CESifo.
    2. Jin, Wei & Zhang, ZhongXiang, "undated". "Capital Accumulation, GreeParadox, and Stranded Assets: An Endogenous Growth Perspective," ETA: Economic Theory and Applications 281286, Fondazione Eni Enrico Mattei (FEEM).
    3. Tsigaris, Panagiotis & Wood, Joel, 2019. "The potential impacts of climate change on capital in the 21st century," Ecological Economics, Elsevier, vol. 162(C), pages 74-86.
    4. Jin, Wei & Shi, Xunpeng & Zhang, Lin, 2021. "Energy transition without dirty capital stranding," Energy Economics, Elsevier, vol. 102(C).
    5. Adrien Fabre & Gernot Wagner, 2020. "Availability of risky geoengineering can make an ambitious climate mitigation agreement more likely," Humanities and Social Sciences Communications, Palgrave Macmillan, vol. 7(1), pages 1-4, December.

    More about this item

    JEL classification:

    • D90 - Microeconomics - - Micro-Based Behavioral Economics - - - General
    • O44 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Environment and Growth
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy
    • 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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