Global Demographic Change and Climate Policies

Reyer Gerlagh, Richard Jaimes, Ali Motavasseli

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Abstract

Between 1950 and 2017, world average life expectancy increased from
below-50 to above-70, while the fertility rate dropped from 5 to about 2.5.
We develop and calibrate an analytic climate-economy model with overlapping
generations to study the effect of such demographic change on capital
markets and optimal climate policies. Our model replicates findings from
the OLG-demography literature, such as a rise in households’ savings, and
a declining rate of return to capital. We also find that demographic change
raises the social cost of carbon, at 2020, from 28 euro/tCO2 in a model that
abstracts from demography, to 94 euro/tCO2 in our calibrated model.
Original languageEnglish
PublisherCentER, Center for Economic Research
Number of pages46
Volume2017-035
Publication statusPublished - 21 Sep 2017

Publication series

NameCentER Discussion Paper
Volume2017-035

Keywords

  • climate change
  • social cost of carbon
  • environmental policy
  • demographic trends

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