Closed-Form Integrated Assessment and Uncertainty

Christian Traeger

No 5464, CESifo Working Paper Series from CESifo

Abstract: The paper derives the optimal carbon tax in closed-form from an integrated assessment of climate change. The formula shows how carbon, temperature, and economic dynamics quantify the optimal mitigation effort. The model’s descriptive power is comparable to numeric models used in policy advising. Uncertainty surrounding climate change remains large, and the paper derives closed-form expressions of welfare loss from shocks and epistemological uncertainty. These expressions interact (intrinsic) risk attitude, distributional moments, and the climatic shadow values, and exhibit different sensitivities to time preference. Welfare gains from reducing uncertainty about temperature feedbacks are much higher than the gains from better measurements of carbon flows.

Keywords: climate change; integrated assessment; uncertainty; learning; risk aversion; recursive utility; social cost of carbon; carbon tax; carbon cycle; climate sensitivity (search for similar items in EconPapers)
JEL-codes: D61 D81 D90 E13 H43 Q54 (search for similar items in EconPapers)
Date: 2015
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:ces:ceswps:_5464

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