Precautionary Climate Change Policies and Optimal Redistribution
We analyse optimal carbon taxes, optimal redistribution within and between non-overlapping generations, and optimal spending levels on climate abatement and adaptation. A positive probability of unexpected large increases in CO2 emissions results in a lower discount rate for global warming damages. More prudent governments set higher carbon taxes and spend more on abatement and sacrifice intra-generational for inter-generational redistribution. As long as households spend a constant fraction of their income on polluting goods, the carbon tax is not used for redistribution and is set at the modified Pigouvian rate, which is higher than the Pigouvian rate if governments are prudent. However, the carbon tax is set below the modified Pigouvian rate if poor households spend relatively more on polluting goods than rich households (Stone-Geary preferences). Policy simulations give insights into the effects of changes in the probability of climate disaster, degrees of intra- and inter-generational inequality aversion, ease of substitution between clean and dirty goods, elasticity of labour supply, productivity of abatement and adaptation, population growth and economic growth on the rates of discount, inequality, global warming and social welfare.
|Date of creation:||2010|
|Contact details of provider:|| Postal: Manor Road, Oxford, OX1 3UQ|
Web page: https://www.oxcarre.ox.ac.uk/
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- W. J. Corlett & D. C. Hague, 1953. "Complementarity and the Excess Burden of Taxation," Review of Economic Studies, Oxford University Press, vol. 21(1), pages 21-30.
- Gierlinger, Johannes & Gollier, Christian, 2008. "Socially Efficient Discounting under Ambiguity Aversion," IDEI Working Papers 561, Institut d'Économie Industrielle (IDEI), Toulouse.
- Sterner, Thomas & Persson, U. Martin, 2007.
"An Even Sterner Review: Introducing Relative Prices into the Discounting Debate,"
dp-07-37, Resources For the Future.
- Thomas Sterner & U. Martin Persson, 2008. "An Even Sterner Review: Introducing Relative Prices into the Discounting Debate," Review of Environmental Economics and Policy, Association of Environmental and Resource Economists, vol. 2(1), pages 61-76, Winter.
- Laroque, Guy R., 2005.
"Indirect taxation is superfluous under separability and taste homogeneity: a simple proof,"
Elsevier, vol. 87(1), pages 141-144, April.
- Guy Laroque, 2004. "Indirect Taxation is Superfluous under Separability and Taste Homogeneity : A Simple Proof," Working Papers 2004-23, Centre de Recherche en Economie et Statistique.
- Stern, N. H., 1976. "On the specification of models of optimum income taxation," Journal of Public Economics, Elsevier, vol. 6(1-2), pages 123-162.
- Bovenberg, A.L. & de Mooij, R.A., 1994.
"Environmental levies and distortionary taxation,"
Other publications TiSEM
4b32deaa-ec2f-4de7-b59b-9, Tilburg University, School of Economics and Management.
- Louis Kaplow, 2006. "Optimal Control of Externalities in the Presence of Income Taxation," NBER Working Papers 12339, National Bureau of Economic Research, Inc.
- Weitzman, Martin L., 1998. "Why the Far-Distant Future Should Be Discounted at Its Lowest Possible Rate," Journal of Environmental Economics and Management, Elsevier, vol. 36(3), pages 201-208, November.
- Weitzman, Martin L., 2009.
"On Modeling and Interpreting the Economics of Catastrophic Climate Change,"
3693423, Harvard University Department of Economics.
- Martin L. Weitzman, 2009. "On Modeling and Interpreting the Economics of Catastrophic Climate Change," The Review of Economics and Statistics, MIT Press, vol. 91(1), pages 1-19, February.
- William D. Nordhaus, 2007. "A Review of the Stern Review on the Economics of Climate Change," Journal of Economic Literature, American Economic Association, vol. 45(3), pages 686-702, September.
- Sinn, Hans-Werner, 2008.
"Public policies against global warming: A supply side approach,"
Munich Reprints in Economics
19638, University of Munich, Department of Economics.
- Hans-Werner Sinn, 2008. "Public policies against global warming: a supply side approach," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 15(4), pages 360-394, August.
- Martin L. Weitzman, 2007. "A Review of the Stern Review on the Economics of Climate Change," Journal of Economic Literature, American Economic Association, vol. 45(3), pages 703-724, September.
When requesting a correction, please mention this item's handle: RePEc:oxf:oxcrwp:049. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Celia Kingham)
If references are entirely missing, you can add them using this form.