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Stranded assets, the social cost of carbon, and directed technical change:

Author

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  • Rick Van der Ploeg
  • Armon Rezai

Abstract

The tractable general equilibrium model developed by Golosov et al. (2014), GHKT for short, is modified to allow for stock-dependent fossil fuel extraction costs and partial exhaustion of fossil fuel reserves, a negative impact of global warming on growth, mean reversion in climate damages, steady labour-augmenting technical progress, specific green technical progress driven by learning by doing, population growth, and a direct effect of the stock of atmospheric carbon on instantaneous welfare. We characterize the social optimum and derive simple rule for both the optimal carbon tax and the renewable energy subsidy, and characterize the optimal amount of untapped fossil fuel.

Suggested Citation

  • Rick Van der Ploeg & Armon Rezai, 2016. "Stranded assets, the social cost of carbon, and directed technical change:," OxCarre Working Papers 176, Oxford Centre for the Analysis of Resource Rich Economies, University of Oxford.
    • Handle: RePEc:oxf:oxcrwp:176
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    File URL: https://ora.ox.ac.uk/objects/uuid:20e5f9d2-4205-43f5-ad5c-e515984cf844
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    Cited by:

    1. Hillebrand, Elmar & Hillebrand, Marten, 2019. "Optimal climate policies in a dynamic multi-country equilibrium model," Journal of Economic Theory, Elsevier, vol. 179(C), pages 200-239.
    2. Ansari, Dawud & Holz, Franziska, 2020. "Between stranded assets and green transformation: Fossil-fuel-producing developing countries towards 2055," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 130, pages 1-1.
    3. van der Ploeg, Frederick & Rezai, Armon, 2021. "Optimal carbon pricing in general equilibrium: Temperature caps and stranded assets in an extended annual DSGE model," Journal of Environmental Economics and Management, Elsevier, vol. 110(C).
    4. Xiaojun Lyu & Haiqian Ke, 2022. "Dynamic Threshold Effect of Directed Technical Change Suppress on Urban Carbon Footprint in China," IJERPH, MDPI, vol. 19(9), pages 1-15, April.
    5. Ted Temzelides & Borghan Narajabad & Bernardino Adao, 2016. "Renewable Technology Adoption and the Macroeconomy," 2016 Meeting Papers 6, Society for Economic Dynamics.
    6. Anderson, Evan W. & Brock, William, 2021. "Logarithmic depreciation," Economic Modelling, Elsevier, vol. 101(C).

    More about this item

    Keywords

    social cost of carbon; carbon tax; renewable energy subsidy; general equilibrium; Ramsey growth; capital accumulation; stranded assets; simple rules;
    All these keywords.

    JEL classification:

    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • Q51 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Valuation of Environmental Effects
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming

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