The optimal carbon tax with a tipping climate and peak temperature

Anthony Wiskich

CAMA Working Papers from Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University

Abstract: This paper describes an integrated assessment model with an unknown temperature threshold where severe and irreversible climate impacts, called a tipping point, occurs. The possibility of tipping leads to the following linked outcomes: a prolonged period of peak temperature; a rebound in emissions prior to and during peak temperature; and a fall in the optimal carbon tax as a ratio of output prior to and during peak temperature. Although tipping can occur in any period where temperature rises to a new maximum, the optimal carbon price can be calculated from future temperature outcomes conditional on no tipping. Learning that tipping has not occurred lowers the tax.

Keywords: Climate change; tipping points; optimal policy; optimal taxes (search for similar items in EconPapers)
JEL-codes: H23 O44 Q30 Q40 Q54 Q56 Q58 (search for similar items in EconPapers)
Pages: 31 pages
Date: 2019-09
New Economics Papers: this item is included in nep-ene, nep-env and nep-pub
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Persistent link: https://EconPapers.repec.org/RePEc:een:camaaa:2019-64

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