 Climate change in times of economic uncertainty: A perverse tragedy of the commons?Ramon Lopez, Roberto Pasten and Pablo Gutiérrez Cubillos Economic Analysis and Policy, 2022, vol. 75, issue C, 209-225 Abstract: We explore the effect of raising economic uncertainty on local and global carbon emissions. Most economic models under uncertainty focus on the effect of risk on the supply of a control variable (e.g., emissions). Here we explore the effect of risk on both the supply and demand of local and global carbon emissions and, therefore, on their equilibrium shadow price. We show that in addition to the consumers’ level of risk aversion and prudence coefficient, an additional parameter not included in standard models, the elasticity of substitution between pollution and conventional inputs, plays a key role as a determinant of local and global emissions. An important implication of the analysis is that, under various specifications widely used for preferences and production technologies, a damning vicious cycle between increasing economic uncertainty and global pollution emissions is likely to occur. Keywords: Climate change; Uncertainty; Higher-order risk attitudes; Risk aversion; Prudence; Cross prudence; Elasticity of factor substitution (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:ecanpo:v:75:y:2022:i:c:p:209-225 DOI: 10.1016/j.eap.2022.05.005 Access Statistics for this article Economic Analysis and Policy is currently edited by Clevo Wilson More articles in Economic Analysis and Policy from Elsevier |
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