 The economic and policy consequences of carbon emissionsWeizhen Meng, Tuyue Chen and Jinqiang Yang Journal of Mathematical Economics, 2025, vol. 117, issue C Abstract: Carbon emissions are increasingly being recognized as a threat to economic well-being. This paper incorporates the carbon cycle into a general equilibrium model to study the asset pricing implications of the interaction between carbon emissions and mitigation policies. Our findings suggest that the accumulation of carbon stocks stimulates mitigation spending, reduces consumption, harms welfare, lowers the risk-free rate, and elevates the risk premium. Furthermore, we propose a framework for policy analysis that includes calculating the social cost of carbon (SCC) and the willingness to pay (WTP). Additionally, results show the complex impacts of carbon dynamics on the risk-free rate. Specifically, higher carbon decay rates and the economic damage caused by carbon increase the risk-free rate, while carbon volatility risk lowers it. Moreover, convex damage functions can reverse the trend of the risk-free rate, causing it to rise with carbon stock. Keywords: Carbon emissions; Asset pricing; Social cost of carbon; Mitigation spending (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:mateco:v:117:y:2025:i:c:s0304406825000205 DOI: 10.1016/j.jmateco.2025.103103 Access Statistics for this article Journal of Mathematical Economics is currently edited by Atsushi (A.) Kajii More articles in Journal of Mathematical Economics from Elsevier |
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