Simple Rules for Climate Policy and Integrated Assessment

Research output: Contribution to JournalArticleAcademicpeer-review

Abstract

A simple integrated assessment framework that gives rules for the optimal carbon price, transition to the carbon-free era and stranded carbon assets is presented, which highlights the ethical, economic, geophysical and political drivers of optimal climate policy. For the ethics we discuss the role of intergenerational inequality aversion and the discount rate, where we show the importance of lower discount rates for appraisal of longer run benefit and of policy makers using lower discount rates than private agents. The economics depends on the costs and rates of technical progress in production of fossil fuel, its substitute renewable energies and sequestration. The geophysics depends on the permanent and transient components of atmospheric carbon and the relatively fast temperature response, and we allow for positive feedbacks. The politics stems from international free-rider problems in absence of a global climate deal. We show how results change if different assumptions are made about each of the drivers of climate policy. Our main objective is to offer an easy back-on-the-envelope analysis, which can be used for teaching and communication with policy makers.

Original languageEnglish
Pages (from-to)77-108
JournalEnvironmental and Resource Economics
Volume72
Issue number1
DOIs
Publication statusPublished - 2019

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environmental policy
discount rate
carbon
ethics
economics
geophysics
teaching
fossil fuel
global climate
politics
communication
Discount rate
Integrated assessment
Climate policy
Simple rules
Carbon
cost
energy
Economics
Politicians

Keywords

  • Climate policy
  • Discounting with declining discount rates
  • Economics
  • Ethics
  • Free riding
  • Geophysics
  • Politics
  • Positive feedback
  • Simple rules

Cite this

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Simple Rules for Climate Policy and Integrated Assessment. / van der Ploeg, Frederick; Rezai, Armon.

In: Environmental and Resource Economics, Vol. 72, No. 1, 2019, p. 77-108.

Research output: Contribution to JournalArticleAcademicpeer-review

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