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Simple Rules for Climate Policy and Integrated Assessment

Frederick (Rick) van der Ploeg () and Armon Rezai

No 7207, CESifo Working Paper Series from CESifo Group Munich

Abstract: A simple integrated assessment framework that gives rules for the optimal carbon price, transition to the carbon-free era and stranded carbon assets is presented, which highlights the ethical, economic, geophysical and political drivers of optimal climate policy. For the ethics we discuss the role of intergenerational inequality aversion and the discount rate, where we show the importance of lower discount rates for appraisal of longer run benefit and of policy makers using lower discount rates than private agents. The economics depends on the costs and rates of technical progress in production of fossil fuel, its substitute renewable energies and sequestration. The geophysics depends on the permanent and transient components of atmospheric carbon and the relatively fast temperature response, and we allow for positive feedbacks. The politics stems from international free-rider problems in absence of a global climate deal. We show how results change if different assumptions are made about each of the drivers of climate policy. Our main objective is to offer an easy back-on-the-envelope analysis, which can be used for teaching and communication with policy makers.

Keywords: simple rules; climate policy; ethics; economics; geophysics; politics; discounting with declining discount rates; positive feedback; free riding (search for similar items in EconPapers)
JEL-codes: D81 H20 Q31 Q38 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ene and nep-env
Date: 2018
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Related works:
Journal Article: Simple Rules for Climate Policy and Integrated Assessment (2019) Downloads
Working Paper: Simple Rules for Climate Policy and Integrated Assessment (2018) Downloads
Working Paper: Simple rules for climate policy and integrated assessment (2018) Downloads
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