@article{205c8396e7a54eb39b1ebfe2d7ef1270,
title = "The social cost of carbon in a non-cooperative world",
abstract = "The recent literature has derived simple formulas for the Social Cost of Carbon (SCC) that are easy to interpret, but that only apply to the global economy. This is an issue since international transfers to sustain the global optimum with the same carbon price for all countries are still lacking after thirty years of climate summits. The main research objective of our paper is to obtain tractable analytical and interpretable formulas for the SCC, the optimal carbon taxes, and the optimal consumption-abatement strategies in a non-cooperative world. We find that the optimal taxes are proportional to national GDP and can be decomposed into a domestic and a foreign component where the latter stems from trade. Besides, heterogeneity in country-specific damage functions together with the size of international trade significantly affects the regional distribution of the SCC. Consequently, trade can also affect the total amount of carbon dioxide emitted into the atmosphere.",
keywords = "Carbon abatement, Climate change economics, DICE, Differential game, Non-cooperative game, Trade",
author = "Christoph Hambel and Holger Kraft and Eduardo Schwartz",
note = "Funding Information: We thank Elizabeth Baldwin, Valentina Bosetti, Max Croce, Simon Dietz, Johannes Emmerling, Elmar Hillebrand, Marten Hillebrand, Svenn Jensen, Ralph Ossa (the editor), Rick van der Ploeg, Armon Rezai, Soheil Shayegh, Olli Tahvonen, Christian Traeger, Ralph Winkler, and two anonymous referees for helpful comments and suggestions. We also thank seminar participants at Bocconi University, WU Vienna, Nova University, and ICADE Business School as well as the participants of the Workshop on Optimal Carbon Price under Climate Risk at FEEM in Milano, the 33rd and 34th annual congress of the European Economic Association (EEA), and the 24th Annual Conference of the European Association of Environmental and Resource Economists (EAERE) for helpful comments and suggestions. All remaining errors are our own. This paper replaces our earlier working paper called “The Carbon Abatement Game”. Holger Kraft and Christoph Hambel gratefully acknowledge financial support by Deutsche Forschungsgemeinschaft (DFG). Funding Information: We thank Elizabeth Baldwin, Valentina Bosetti, Max Croce, Simon Dietz, Johannes Emmerling, Elmar Hillebrand, Marten Hillebrand, Svenn Jensen, Ralph Ossa (the editor), Rick van der Ploeg, Armon Rezai, Soheil Shayegh, Olli Tahvonen, Christian Traeger, Ralph Winkler, and two anonymous referees for helpful comments and suggestions. We also thank seminar participants at Bocconi University, WU Vienna, Nova University, and ICADE Business School as well as the participants of the Workshop on Optimal Carbon Price under Climate Risk at FEEM in Milano, the 33rd and 34th annual congress of the European Economic Association (EEA), and the 24th Annual Conference of the European Association of Environmental and Resource Economists (EAERE) for helpful comments and suggestions. All remaining errors are our own. This paper replaces our earlier working paper called “The Carbon Abatement Game”. Holger Kraft and Christoph Hambel gratefully acknowledge financial support by Deutsche Forschungsgemeinschaft (DFG) . ",
year = "2021",
month = jul,
doi = "10.1016/j.jinteco.2021.103490",
language = "English",
volume = "131",
journal = "Journal of International Economics",
issn = "0022-1996",
publisher = "Elsevier B.V.",
}