Abstract
| Original language | English |
|---|---|
| Pages (from-to) | 1-44 |
| Journal | Journal of the European Economic Association |
| Volume | 16 |
| Issue number | 1 |
| Early online date | Mar 2017 |
| DOIs | |
| Publication status | Published - Feb 2018 |
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Consistent climate policies. / Gerlagh, Reyer; Liski, Matti.
In: Journal of the European Economic Association, Vol. 16, No. 1, 02.2018, p. 1-44.Research output: Contribution to journal › Article › Scientific › peer-review
TY - JOUR
T1 - Consistent climate policies
AU - Gerlagh, Reyer
AU - Liski, Matti
PY - 2018/2
Y1 - 2018/2
N2 - What are the optimal climate policies when time preferences deviate from the standard exponential discounting and decision makers cannot commit to future policies? We show that, with time-declining discounting, the delay and persistence of climate impacts provide a commitment device to policy makers. We quantify the commitment value in a climate-economy model by solving time-consistent Markov equilibrium capital and emission taxes explicitly. The returns on capital and climate investments are no longer equal, leading to a large increase in the emission tax, compared to a benchmark with equalized returns. The commitment value increases the tax by a factor of 20 in our quantitative assessment.
AB - What are the optimal climate policies when time preferences deviate from the standard exponential discounting and decision makers cannot commit to future policies? We show that, with time-declining discounting, the delay and persistence of climate impacts provide a commitment device to policy makers. We quantify the commitment value in a climate-economy model by solving time-consistent Markov equilibrium capital and emission taxes explicitly. The returns on capital and climate investments are no longer equal, leading to a large increase in the emission tax, compared to a benchmark with equalized returns. The commitment value increases the tax by a factor of 20 in our quantitative assessment.
U2 - 10.1093/jeea/jvx010
DO - 10.1093/jeea/jvx010
M3 - Article
VL - 16
SP - 1
EP - 44
JO - Journal of the European Economic Association
JF - Journal of the European Economic Association
SN - 1542-4774
IS - 1
ER -