 Optimal carbon policies in a dynamic heterogeneous worldKirill Borissov and Lucas Bretschger European Economic Review, 2022, vol. 148, issue C Abstract: We derive the optimal contributions to global climate policy when countries differ with respect to income level and pollution intensity. Countries’ growth rates are determined endogenously, and abatement efficiency is improved by technical progress. We show that country heterogeneity has a crucial impact on optimal policy contributions: more developed countries have to make a larger effort while less developed countries are allowed to graduate under a less stringent environmental regime. The optimal allocation of pollution permits depends on international trade. In the absence of international permit trade, more developed countries should receive more permits than the less developed countries, but permit prices are higher in the rich countries and eventually countries converge in income. With international permit trade, more developed countries receive less permits than the less developed. When global distribution of physical capital is uneven and the aggregate pollution ceiling is low, poor countries receive all the permits. Keywords: Climate policy; Growth; Abatement efficiency; Policy convergence (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:eecrev:v:148:y:2022:i:c:s0014292122001490 DOI: 10.1016/j.euroecorev.2022.104253 Access Statistics for this article European Economic Review is currently edited by T.S. Eicher, A. Imrohoroglu, E. Leeper, J. Oechssler and M. Pesendorfer More articles in European Economic Review from Elsevier |
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