Consistent climate policies

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A1 Alkuperäisartikkeli tieteellisessä aikakauslehdessä
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Date

2018-02

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Department of Economics

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en

Pages

44

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Journal of the European Economic Association, Volume 16, issue 1, pp. 1-44

Abstract

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.

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DOI

10.1093/jeea/jvx010

Citation

Gerlagh, R & Liski, M 2018, 'Consistent climate policies', Journal of the European Economic Association, vol. 16, no. 1, pp. 1-44. https://doi.org/10.1093/jeea/jvx010

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https://urn.fi/URN:NBN:fi:aalto-202406124296

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[article-cris] Kauppakorkeakoulu / BIZ