Economics and Climate Change: Integrated Assessment in a Multi-Region World

John Hassler and Per Krusell

No 17757, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: This paper develops a model that integrates the climate and the global economy---an integrated assessment model---with which different policy scenarios can be analyzed and compared. The model is a dynamic stochastic general-equilibrium setup with a continuum of regions. Thus, it is a full stochastic general-equilibrium version of RICE, Nordhaus's pioneering multi-region integrated assessment model. Like RICE, our model features traded fossil fuel but otherwise has no markets across regions---there is no insurance nor any intertemporal trade across them. The extreme form of market incompleteness is not fully realistic but arguably not a decent approximation of reality. Its major advantage is that, along with a set of reasonable assumptions on preferences, technology, and nature, it allows a closed-form model solution. We use the model to assess the welfare consequences of carbon taxes that differ across as well as within oil-consuming and -producing regions. We show that, surprisingly, only taxes on oil producers can improve the climate: taxes on oil consumers have no effect at all. The calibrated model suggests large differences in views on climate policy across regions.

JEL-codes: H23 O44 Q0 (search for similar items in EconPapers)
Date: 2012-01
New Economics Papers: this item is included in nep-dge, nep-ene and nep-env
Note: EEE EFG PE
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (99)

Published as John Hassler & Per Krusell, 2012. "Economics And Climate Change: Integrated Assessment In A Multi-Region World," Journal of the European Economic Association, European Economic Association, vol. 10(5), pages 974-1000, October.

Downloads: (external link)
http://www.nber.org/papers/w17757.pdf (application/pdf)

Related works:
Journal Article: ECONOMICS AND CLIMATE CHANGE: INTEGRATED ASSESSMENT IN A MULTI-REGION WORLD (2012)
Working Paper: Economics and Climate Change: Integrated Assessment in a Multi-Region World (2012)
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:nbr:nberwo:17757

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w17757

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().