Climate change policy under polar amplification

W. Brock and Anastasios Xepapadeas

European Economic Review, 2017, vol. 94, issue C, 263-282

Abstract: Polar amplification is an established scientific fact which has been associated with the surface albedo feedback and with heat and moisture transport from the Equator to the Poles. In this paper we unify a two-box climate model, which allows for heat and moisture transport from the southern region to the northern region, with an economic model of welfare optimization. Our main contribution is to show that by ignoring spatial heat and moisture transport and the resulting polar amplification, the regulator may overestimate or underestimate the tax on greenhouse gas emissions. The direction of bias depends on the relations between marginal damages from temperature increase in each region. We also determine the welfare cost when a regulator mistakenly ignores polar amplification. Numerical simulations confirm our theoretical results, while ballpark estimates indicate that the tax bias could be as high as 20%, while welfare cost could reach 2% of global effective steady-state consumption.

Keywords: Polar amplification; Spatial heat and moisture transport; Optimal policy; Emission taxes; Market discount rate (search for similar items in EconPapers)
JEL-codes: Q54 Q58 (search for similar items in EconPapers)
Date: 2017
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (26)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0014292117300508
Full text for ScienceDirect subscribers only

Related works:
Journal Article: Climate change policy under polar amplification (2017)
Working Paper: Climate Change Policy under Polar Amplification (2016)
Working Paper: Climate Change Policy under Polar Amplification (2016)
Working Paper: Climate Change Policy under Polar Amplification (2016)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:eecrev:v:94:y:2017:i:c:p:263-282

DOI: 10.1016/j.euroecorev.2017.03.003

Access Statistics for this article

European Economic Review is currently edited by T.S. Eicher, A. Imrohoroglu, E. Leeper, J. Oechssler and M. Pesendorfer

More articles in European Economic Review from Elsevier
Bibliographic data for series maintained by Catherine Liu ().