All Inclusive Climate Policy in a Growing Economy: The Role of Human Health

Lucas Bretschger and Evgenij Komarov ()
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Evgenij Komarov: Center of Economic Research, ETH Zurich, Zurichbergstrasse 18, 8092 Zurich, Switzerland

No 23/384, CER-ETH Economics working paper series from CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich

Abstract: We determine optimal climate policy using a dynamic climate model that accounts for the damages to capital and human health from burning fossil fuels. Our theoretical macroeconomic approach incorporates a separate health sector into an integrated climate-economy framework and provides closed-form analytical solutions for the main model variables. Economic growth is endogenously driven by innovation, with labor availability and productivity, and thus human health, being critical. Calibrating the model, we find that 44% of total resource stock should be extracted when considering damages to capital, but only 1% when health damages are included. The health perspective requires optimal environmental policies that are much more stringent than those normally advocated in climate economics, since harm to human health has negative effects on economic growth. Socially optimal growth exceeds the rate under free market conditions.

Keywords: Optimal climate policy; human health; climate damages; optimum resource stock (search for similar items in EconPapers)
JEL-codes: I15 Q32 Q54 (search for similar items in EconPapers)
Pages: 39 pages
Date: 2023-05
New Economics Papers: this item is included in nep-ene, nep-env and nep-res
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Journal Article: All Inclusive Climate Policy in a Growing Economy: The Role of Human Health (2024)
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Persistent link: https://EconPapers.repec.org/RePEc:eth:wpswif:23-384

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