Abrupt positive feedback and the social cost of carbon

Research output: Contribution to JournalArticleAcademicpeer-review

Abstract

Optimal climate policy should act in a precautionary fashion to deal with tipping points that occur at some future random moment. The optimal carbon tax should include an additional component on top of the conventional present discounted value of marginal global warming damages. This component increases with the sensitivity of the hazard to temperature or the stock of atmospheric carbon. If the hazard of a catastrophe is constant, no correction is needed of the usual Pigouvian tax. The results are applied to a tipping point resulting from an abrupt and irreversible release of greenhouse gases from the ocean floors and surface of the earth, which set in motion a positive feedback loop. Convex enough hazard functions cause overshooting of the carbon tax, but a linear hazard function gives rise to undershooting. A more convex hazard function and a high discount rate speed up adjustment. © 2014 Elsevier B.V.
Original languageEnglish
Pages (from-to)28-41
JournalEuropean Economic Review
Volume67
DOIs
Publication statusPublished - 2014

Fingerprint

Carbon
Hazard function
Social costs
Positive feedback
Hazard
Carbon tax
Catastrophe
Climate policy
Greenhouse gases
Pigouvian tax
Temperature
Discount rate
Global warming
Damage
Overshooting

Bibliographical note

PT: J; NR: 29; TC: 0; J9: EUR ECON REV; PG: 14; GA: AE6EQ; UT: WOS:000334083800002

Cite this

@article{bdfeb8e0bd5945c7b9b1ea0812221c99,
title = "Abrupt positive feedback and the social cost of carbon",
abstract = "Optimal climate policy should act in a precautionary fashion to deal with tipping points that occur at some future random moment. The optimal carbon tax should include an additional component on top of the conventional present discounted value of marginal global warming damages. This component increases with the sensitivity of the hazard to temperature or the stock of atmospheric carbon. If the hazard of a catastrophe is constant, no correction is needed of the usual Pigouvian tax. The results are applied to a tipping point resulting from an abrupt and irreversible release of greenhouse gases from the ocean floors and surface of the earth, which set in motion a positive feedback loop. Convex enough hazard functions cause overshooting of the carbon tax, but a linear hazard function gives rise to undershooting. A more convex hazard function and a high discount rate speed up adjustment. {\circledC} 2014 Elsevier B.V.",
author = "{van der Ploeg}, F.",
note = "PT: J; NR: 29; TC: 0; J9: EUR ECON REV; PG: 14; GA: AE6EQ; UT: WOS:000334083800002",
year = "2014",
doi = "10.1016/j.euroecorev.2014.01.004",
language = "English",
volume = "67",
pages = "28--41",
journal = "European Economic Review",
issn = "0014-2921",
publisher = "Elsevier",

}

Abrupt positive feedback and the social cost of carbon. / van der Ploeg, F.

In: European Economic Review, Vol. 67, 2014, p. 28-41.

Research output: Contribution to JournalArticleAcademicpeer-review

TY - JOUR

T1 - Abrupt positive feedback and the social cost of carbon

AU - van der Ploeg, F.

N1 - PT: J; NR: 29; TC: 0; J9: EUR ECON REV; PG: 14; GA: AE6EQ; UT: WOS:000334083800002

PY - 2014

Y1 - 2014

N2 - Optimal climate policy should act in a precautionary fashion to deal with tipping points that occur at some future random moment. The optimal carbon tax should include an additional component on top of the conventional present discounted value of marginal global warming damages. This component increases with the sensitivity of the hazard to temperature or the stock of atmospheric carbon. If the hazard of a catastrophe is constant, no correction is needed of the usual Pigouvian tax. The results are applied to a tipping point resulting from an abrupt and irreversible release of greenhouse gases from the ocean floors and surface of the earth, which set in motion a positive feedback loop. Convex enough hazard functions cause overshooting of the carbon tax, but a linear hazard function gives rise to undershooting. A more convex hazard function and a high discount rate speed up adjustment. © 2014 Elsevier B.V.

AB - Optimal climate policy should act in a precautionary fashion to deal with tipping points that occur at some future random moment. The optimal carbon tax should include an additional component on top of the conventional present discounted value of marginal global warming damages. This component increases with the sensitivity of the hazard to temperature or the stock of atmospheric carbon. If the hazard of a catastrophe is constant, no correction is needed of the usual Pigouvian tax. The results are applied to a tipping point resulting from an abrupt and irreversible release of greenhouse gases from the ocean floors and surface of the earth, which set in motion a positive feedback loop. Convex enough hazard functions cause overshooting of the carbon tax, but a linear hazard function gives rise to undershooting. A more convex hazard function and a high discount rate speed up adjustment. © 2014 Elsevier B.V.

U2 - 10.1016/j.euroecorev.2014.01.004

DO - 10.1016/j.euroecorev.2014.01.004

M3 - Article

VL - 67

SP - 28

EP - 41

JO - European Economic Review

JF - European Economic Review

SN - 0014-2921

ER -