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Spatial Climate-Economic Models in the Design of Optimal Climate Policies across Locations

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

Abstract

We couple a one-dimensional energy balance climate model with heat transportation across latitudes, with an economic growth model. We derive temperature and damage distributions across locations and optimal taxes on fossil fuels which, in contrast to zero-dimensional Integrated Assessment Models, account for cross latitude externalities. We analyse the impact of welfare weights on the spatial structure of optimal carbon taxes and identify conditions under which these taxes are spatially nonhomogeneous and are lower in latitudes with relatively lower per capita income populations. We show the way that heat transportation affects local economic variables and taxes, and locate sufficient conditions for optimal mitigation policies to have rapid ramp-up initially and then decrease over time.

Suggested Citation

  • Brock, William A. & Engstrom, Gustav & Xepapadeas, Anastasios, 2012. "Spatial Climate-Economic Models in the Design of Optimal Climate Policies across Locations," Climate Change and Sustainable Development 139485, Fondazione Eni Enrico Mattei (FEEM).
    • Handle: RePEc:ags:feemcl:139485
    DOI: 10.22004/ag.econ.139485
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    Cited by:

    1. Vasiliki Manousi & Anastasios Xepapadeas, 2013. "Mitigation and Solar Radiation Management in Climate Change Policies," Working Papers 2013.41, Fondazione Eni Enrico Mattei.
    2. Dumas, Marion & Rising, James & Urpelainen, Johannes, 2016. "Political competition and renewable energy transitions over long time horizons: A dynamic approach," Ecological Economics, Elsevier, vol. 124(C), pages 175-184.
    3. Karp, Larry & Traeger, Christian, 2024. "Taxes versus quantities reassessed," Journal of Environmental Economics and Management, Elsevier, vol. 125(C).
    4. William Brock & Anastasios Xepapadeas, 2015. "Spatial Heat Transport, Polar Amplification and Climate Change Policy," DEOS Working Papers 1515, Athens University of Economics and Business.
    5. Brock, W. & Xepapadeas, A., 2017. "Climate change policy under polar amplification," European Economic Review, Elsevier, vol. 99(C), pages 93-112.
    6. William Brock & Anastasios Xepapadeas, 2020. "Climate change policy under spatial heat transport and polar amplification," Chapters, in: Graciela Chichilnisky & Armon Rezai (ed.), Handbook on the Economics of Climate Change, chapter 7, pages 127-166, Edward Elgar Publishing.
    7. Anastasios Xepapadeas, 2022. "On the optimal management of environmental stock externalities," Proceedings of the National Academy of Sciences, Proceedings of the National Academy of Sciences, vol. 119(24), pages 2202679119-, June.
    8. Brock, William & Xepapadeas, Anastasios, 2021. "Regional climate policy under deep uncertainty: robust control and distributional concerns," Environment and Development Economics, Cambridge University Press, vol. 26(3), pages 211-238, June.
    9. William Brock & Anastasios Xepapadeas, 2020. "Spatial Environmental and Resource Economics," DEOS Working Papers 2002, Athens University of Economics and Business.
    10. Hassler, J. & Krusell, P. & Smith, A.A., 2016. "Environmental Macroeconomics," Handbook of Macroeconomics, in: J. B. Taylor & Harald Uhlig (ed.), Handbook of Macroeconomics, edition 1, volume 2, chapter 0, pages 1893-2008, Elsevier.
    11. Dieter Grass, 2015. "From 0D to 1D spatial models using OCMat," Papers 1505.03956, arXiv.org.
    12. Manoussi, Vassiliki & Xepapadeas, Anastasios, 2014. "Cooperation and Competition in Climate Change Policies: Mitigation and Climate Engineering when Countries are Asymmetric," Climate Change and Sustainable Development 190930, Fondazione Eni Enrico Mattei (FEEM).
    13. Engström, Gustav, 2016. "Structural and climatic change," Structural Change and Economic Dynamics, Elsevier, vol. 37(C), pages 62-74.
    14. Lint Barrage, 2019. "The Nobel Memorial Prize for William D. Nordhaus," Scandinavian Journal of Economics, Wiley Blackwell, vol. 121(3), pages 884-924, July.
    15. Anastasios Xepapadeas & Athanasios Yannacopoulos, 2018. "Spatially Structured Deep Uncertainty, Robust Control, and Climate Change Policies," DEOS Working Papers 1807, Athens University of Economics and Business.
    16. Jonathan I. Dingel & Kyle C. Meng & Solomon M. Hsiang, 2019. "Spatial Correlation, Trade, and Inequality: Evidence from the Global Climate," NBER Working Papers 25447, National Bureau of Economic Research, Inc.

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    More about this item

    Keywords

    Environmental Economics and Policy;

    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
    • R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes

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