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An Economic Anatomy of Optimal Climate Policy

Juan Moreno-Cruz (), Gernot Wagner and David W. Keith

No 7059, CESifo Working Paper Series from CESifo Group Munich

Abstract: This paper introduces geoengineering into an optimal control model of climate change economics. Together with mitigation and adaptation, carbon and solar geoengineering span the universe of possible climate policies. Their wildly different characteristics have important implications for climate policy. We show in the context of our model that: (i) the optimal carbon tax equals the marginal cost of carbon geoengineering; (ii) the introduction of either form of geoengineering leads to higher emissions yet lower temperatures; (iii) in a world with above-optimal cumulative emissions, only a complete set of instruments can minimize climate damages.

Keywords: climate change; climate policy; mitigation; adaptation; carbon geoengineering; carbon dioxide removal; solar geoengineering; solar radiation management (search for similar items in EconPapers)
JEL-codes: D90 O44 Q48 Q54 Q58 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-agr, nep-ene, nep-env and nep-reg
Date: 2018
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