Baumol’s Climate Disease

Fangzhi Wanga, Hua Liao () and Richard Tol
Additional contact information
Fangzhi Wanga: School of Management and Economics, Beijing Institute of Technology, Beijing, 100081; China Center for Energy and Environmental Policy Research; Beijing Institute of Technology, Beijing, 100081, China:
Hua Liao: School of Management and Economics, Beijing Institute of Technology, Beijing, 100081; China Center for Energy and Environmental Policy Research; Beijing Institute of Technology, Beijing, 100081, China:
Authors registered in the RePEc Author Service: Adnan M. S. Fakir

Working Paper Series from Department of Economics, University of Sussex Business School

Abstract: We investigate optimal carbon abatement in a dynamic general equilibrium climate-economy model with endogenous structural change. By differentiating the production of investment from consumption, we show that social cost of carbon can be conceived as a reduction in physical capital. In addition, we distinguish two final sectors in terms of productivity growth and climate vulnerability. We theoretically show that heterogeneous climate vulnerability results in a climate-induced version of Baumol’s cost disease. Further, if climate-vulnerable sectors have high (low) productivity growth, climate impact can either ameliorate (aggravate) the Baumol’s cost disease, call for less (more) stringent climate policy. We conclude that carbon abatement should not only factor in unpriced climate capital, but also be tailored to Baumol’s cost and climate diseases.

Keywords: Structural change; Climate capital; Integrated assessment model; Social cost of carbon; Baumol’s cost disease (search for similar items in EconPapers)
Date: 2023-11
New Economics Papers: this item is included in nep-exp, nep-gen and nep-lab
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
https://www.sussex.ac.uk/webteam/gateway/file.php?name=wps-07-2023.pdf&site=18 (application/pdf)

Related works:
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:sus:susewp:0723

Access Statistics for this paper

More papers in Working Paper Series from Department of Economics, University of Sussex Business School Contact information at EDIRC.
Bibliographic data for series maintained by University of Sussex Business School Communications Team ().