 Mirage on the horizon: Geoengineering and carbon taxation without commitmentDaron Acemoglu and Will Rafey Journal of Public Economics, 2023, vol. 219, issue C Abstract: We show that, in a model without commitment to future policies, geoengineering breakthroughs can have adverse environmental and welfare effects because they change the (equilibrium) carbon taxes. In our model, energy producers emit carbon, which creates a negative environmental externality, and may decide to switch to cleaner technology. A benevolent social planner sets carbon taxes without commitment. Higher future carbon taxes both reduce emissions given technology and encourage energy producers to switch to cleaner technology. Geoengineering advances, which reduce the negative environmental effects of the existing stock of carbon, decrease future carbon taxes and thus discourage private investments in conventional clean technology. We characterize the conditions under which these advances diminish—rather than improve—environmental quality and welfare, and show that given current estimates of costs and environmental damages, these conditions are likely to be satisfied in our model. Keywords: Carbon tax; Geoengineering; Environment; Innovation; Time inconsistency (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:pubeco:v:219:y:2023:i:c:s0047272722002043 DOI: 10.1016/j.jpubeco.2022.104802 Access Statistics for this article Journal of Public Economics is currently edited by R. Boadway and J. Poterba More articles in Journal of Public Economics from Elsevier |
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