Intergenerational inequality aversion, growth and the role of damages: Occam's rule for hte global carbon tax

Frederick (Rick) van der Ploeg and Armon Rezai

No 150, OxCarre Working Papers from Oxford Centre for the Analysis of Resource Rich Economies, University of Oxford

Abstract: We derive a simple rule for a nearly optimal carbon tax that can be implemented and tested in a decentralized market economy. Our simple rule depends on the effect of the pure rate of time preference, growth and intergenerational inequality aversion and basic parameters of the carbon cycle, but also on any adverse effects of global warming on economic growth and mean reversion in climate damages. The performance of the simple rule is excellent and yields only tiny welfare losses compared with the true welfare optimum under a wide range of perturbations including some extreme runs designed to severely road-test the rule. Our IAM allows for scarce fossil fuel and endogenous energy transitions and generates cumulative carbon emissions and stranded assets which are also well predicted by our rule.

Keywords: simple rule; welfare losses; optimal carbon tax; intergenerational inequality aversion; growth; alternative climate damage specifications; stranded assets; transition times (search for similar items in EconPapers)
JEL-codes: H21 Q51 Q54 (search for similar items in EconPapers)
Date: 2014-05-09
New Economics Papers: this item is included in nep-ene and nep-env
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

Downloads: (external link)
https://ora.ox.ac.uk/objects/uuid:f54444e8-6a6f-42ec-bc3e-71a6b41b27e9 (text/html)

Related works:
Journal Article: Intergenerational Inequality Aversion, Growth, and the Role of Damages: Occam's Rule for the Global Carbon Tax (2016)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:oxf:oxcrwp:150

Access Statistics for this paper

More papers in OxCarre Working Papers from Oxford Centre for the Analysis of Resource Rich Economies, University of Oxford Contact information at EDIRC.
Bibliographic data for series maintained by Melis Boya ( this e-mail address is bad, please contact ).