Can Today's and Tomorrow's World Uniformly Gain from Carbon Taxation?

Laurence Kotlikoff, Felix Kubler, Andrey Polbin and Simon Scheidegger

No 29224, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Climate change will impact current and future generations in different regions very differently. This paper develops the first large-scale, annually calibrated, multi-region, overlapping generations model of climate change and carbon policy. It features region-specific temperature and damage functions with the phased impact of emissions on global and regional temperature calibrated to the latest scientific evidence. Absent policy, climate change may, under high-damage scenarios, dramatically reduce GDP in most regions, with India, Brazil, and the South Asian Pacific suffering long-term catastrophic damages. Carbon taxation, coupled with region- and generation-specific transfers, can both correct the carbon externality and raise the welfare of all current and future agents across all regions by 4.3 percent. The impact on the use and duration of fossil fuels is dramatic as is the reduction in the path of global emissions. However, achieving completely uniform welfare gains leaves future generations in particular regions facing exceptionally high compensatory payments. Fortunately, a carbon tax-cum redistribution policy that limits this burden for any generation in any region to less than 10 percent, measured on a consumption-equivalent basis, can deliver a 4.0 percent or higher welfare gain for all peoplekind – present and future. However, carbon taxes set through time, at carbon’s marginal social cost, do far too little to mitigate climate change unless all major emitters, particularly China, adopt them and do so immediately.

JEL-codes: H23 O44 (search for similar items in EconPapers)
Date: 2021-09
New Economics Papers: this item is included in nep-cna, nep-dge, nep-ene, nep-env, nep-isf and nep-pub
Note: EEE EFG PE
References: Add references at CitEc
Citations: View citations in EconPapers (5)

Published as Laurence Kotlikoff & Felix Kubler & Andrey Polbin & Simon Scheidegger, 2024. "Can today’s and tomorrow’s world uniformly gain from carbon taxation?," European Economic Review, .

Downloads: (external link)
http://www.nber.org/papers/w29224.pdf (application/pdf)

Related works:
Journal Article: Can today’s and tomorrow’s world uniformly gain from carbon taxation? (2024)
Working Paper: Can today's and tomorrow's world uniformly gain from carbon taxation? (2021)
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:29224

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w29224

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 ().