DOES THE ADVERSE ANNOUNCEMENT EFFECT OF CLIMATE POLICY MATTER? — A DYNAMIC GENERAL EQUILIBRIUM ANALYSIS

Marie-Catherine Riekhof and Johannes Bröcker
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Johannes Bröcker: Department of Economics, Christian-Albrechts University, Kiel, Olshausenstrasse 40 24118 Kiel, Germany

Climate Change Economics (CCE), 2017, vol. 08, issue 02, 1-34

Abstract: We consider a carbon emissions tax announced today, but implemented after a known time-lag. Before implementation, the announcement induces higher emissions than without intervention. In welfare terms, this adverse announcement effect could more than outweigh the gain after tax implementation. We quantify a “critical lag” such that a shorter (longer) implementation lag is a welfare gain (loss) over no-intervention. We identify resource scarcity as the main driver for a short critical lag. The model is a global Ramsey Model extended by an exhaustible carbon resource and linked to a climate model.

Keywords: Climate policy; announcement effect; dynamic general equilibrium; nonrenewable resource; backstop; green paradox; welfare evaluation (search for similar items in EconPapers)
Date: 2017
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Citations: View citations in EconPapers (7)

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DOI: 10.1142/S2010007817500075

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