EconPapers    
Economics at your fingertips  
 

Steering the Climate System: Using Inertia to Lower the Cost of Policy

Derek Lemoine and Ivan Rudik

American Economic Review, 2017, vol. 107, issue 10, 2947-57

Abstract: Common views hold that the efficient way to limit warming to a chosen level is to price carbon emissions at a rate that increases exponentially. We show that this Hotelling tax on carbon emissions is actually inefficient. The least-cost policy path takes advantage of the climate system's inertia to delay reducing emissions and allow greater cumulative emissions. The efficient carbon tax follows an inverse-U-shaped path and grows more slowly than the Hotelling tax. Economic models that assume exponentially increasing carbon taxes are overestimating the cost of limiting warming, overestimating the efficient near-term carbon tax, and overvaluing technologies that mature sooner.

JEL-codes: H23 Q54 Q58 (search for similar items in EconPapers)
Date: 2017
Note: DOI: 10.1257/aer.20150986
References: Add references at CitEc
Citations View citations in EconPapers (7) Track citations by RSS feed

Downloads: (external link)
https://www.aeaweb.org/articles?id=10.1257/aer.20150986 (application/pdf)
https://www.aeaweb.org/articles/attachments?retrie ... yXgpUp2QLEHVenCkNDm- (application/zip)
https://www.aeaweb.org/articles/attachments?retrie ... Z97zBqJCpmWjutY71u8i (application/pdf)
https://www.aeaweb.org/articles/attachments?retrie ... z_6cxE37SCrKtIlwOEAQ (application/zip)
Access to full text is restricted to AEA members and institutional subscribers.

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:aea:aecrev:v:107:y:2017:i:10:p:2947-57

Ordering information: This journal article can be ordered from
https://www.aeaweb.org/journals/subscriptions

Access Statistics for this article

American Economic Review is currently edited by Esther Duflo

More articles in American Economic Review from American Economic Association Contact information at EDIRC.
Bibliographic data for series maintained by Michael P. Albert ().

 
Page updated 2018-09-12
Handle: RePEc:aea:aecrev:v:107:y:2017:i:10:p:2947-57