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ACE - Analytic Climate Economy

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  • Traeger, Christian

Abstract

The paper discusses optimal carbon taxation in an analytic quantitative integrated assessment model (IAM). The model links IAM components and parametric assumptions directly to their policy impacts. The paper discusses the distinct tax impact of carbon versus temperature dynamics and uses the see-through model to illustrate various aspects of IAM calibrations including the differentiation between consumption and investments goods. Novel to analytic IAMs are the explicit temperature dynamics, a general economy, energy sectors including capital, various degrees of substitutability across energy sources, an approximation of capital persistence, and objective functions that include CES preferences and population weighting. ACE opens the door to tractable forward-looking stochastic modeling and dynamic strategic interactions in complex IAMs, explored in accompanying work.

Suggested Citation

  • Traeger, Christian, 2021. "ACE - Analytic Climate Economy," CEPR Discussion Papers 15968, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:15968
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    Cited by:

    1. Moritz A. Drupp & Frikk Nesje & Robert C. Schmidt & Robert Christian Schmidt, 2022. "Pricing Carbon," CESifo Working Paper Series 9608, CESifo.
    2. Bretschger, Lucas, 2024. "Green Road is open: Economic Pathway with a carbon price escalator," Journal of Environmental Economics and Management, Elsevier, vol. 127(C).
    3. Waffenschmidt, Brigitte, 2021. "Nachhaltigkeit: Modewort oder Erwartung der Generation Y an ihre Arbeitgeber," EconStor Research Reports 246810, ZBW - Leibniz Information Centre for Economics.
    4. Bretschger, Lucas, 2024. "Energy transition and climate change abatement: A macroeconomic analysis," Resource and Energy Economics, Elsevier, vol. 76(C).
    5. Ghosh, Sumita, 2021. "Urban agriculture potential of home gardens in residential land uses: A case study of regional City of Dubbo, Australia," Land Use Policy, Elsevier, vol. 109(C).
    6. Rising, James A. & Taylor, Charlotte & Ives, Matthew C. & Ward, Robert E.t., 2022. "Challenges and innovations in the economic evaluation of the risks of climate change," LSE Research Online Documents on Economics 114941, London School of Economics and Political Science, LSE Library.
    7. Rising, James A. & Taylor, Charlotte & Ives, Matthew C. & Ward, Robert E.T., 2022. "Challenges and innovations in the economic evaluation of the risks of climate change," Ecological Economics, Elsevier, vol. 197(C).

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    More about this item

    Keywords

    Climate change; Integrated assessment; Social cost of carbon; Carbon tax; Carbon cycle; Temperature; Climate sensitivity; Technological progress; Capital persistence; Population weighting;
    All these keywords.

    JEL classification:

    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • H43 - Public Economics - - Publicly Provided Goods - - - Project Evaluation; Social Discount Rate
    • E13 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Neoclassical
    • D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General
    • D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis

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