Quotation Rezai, Armon, van der Ploeg, Frederick. 2015. Robustness of a simple rule for the social cost of carbon. Economics Letters 132, 48-55.




The optimal social cost of carbon is in general equilibrium proportional to GDP if utility is logarithmic, production is CobbDouglas, depreciation is 100% every period, climate damages as fraction of production decline exponentially with the stock of atmospheric carbon, and fossil fuel extraction does not require capital. The time profile and size of the optimal carbon tax corresponding to this simple rule are not robust to more convex climate damages, smaller elasticities of factor substitution and non-unitary coefficients of relative intergenerational inequality aversion. The optimal timing of energy transitions and the amount of fossil fuel reserves to be locked up in the earth are also not accurately predicted by this framework. Still, in terms of welfare and global warming the simple rule for the optimal social cost of carbon manages to get quite close to the first best.


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Status of publication Published
Affiliation WU
Type of publication Journal article
Journal Economics Letters
Citation Index SSCI
WU Journalrating 2009 A
WU-Journal-Rating new FIN-A, STRAT-B, VW-B, WH-B
Language English
Title Robustness of a simple rule for the social cost of carbon
Volume 132
Year 2015
Page from 48
Page to 55
Reviewed? Y
URL http://www.oxcarre.ox.ac.uk/images/stories/papers/PolicyPapers/oxcarrepp201526.pdf
DOI http://dx.doi.org/10.1016/j.econlet.2015.04.007


Financialisation, growth and biophysical boundaries
Rezai, Armon (Details)
van der Ploeg, Frederick (Oxford University, United Kingdom)
Institute for Ecological Economics IN (Details)
Economics of Inequality FI (Details)
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