Quotation Rezai, Armon, van der Ploeg, Frederick. 2016. Intergenerational inequality aversion, growth and the role of damages: Occam's rule for the global carbon tax. Journal of the Association of Environmental and Resource Economists 3 (2), 493-522.


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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 negligible 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.

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Publication's profile

Status of publication Published
Affiliation WU
Type of publication Journal article
Journal Journal of the Association of Environmental and Resource Economists
WU-Journal-Rating new WH-B
Language English
Title Intergenerational inequality aversion, growth and the role of damages: Occam's rule for the global carbon tax
Volume 3
Number 2
Year 2016
Page from 493
Page to 522
Reviewed? Y
URL http://www.journals.uchicago.edu/toc/jaere/current
DOI http://dx.doi.org/10.1086/686294

Associations

People
Rezai, Armon (Details)
External
van der Ploeg, Frederick (Oxford University, United Kingdom)
Organization
Institute for Ecological Economics IN (Details)
Economics of Inequality FI (Details)
Research areas (Ă–STAT Classification 'Statistik Austria')
2928 Environmental economics (Details)
5325 Political economics (Details)
5334 Political economic policy (Details)
5335 Political economic theory (Details)
5341 Economic policy (Details)
5353 Environmental economics (Details)
5924 Environmental economics (Details)
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