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Title:Energy balance climate models and the spatial structure of optimal mitigation policies PDF Logo
Authors:Brock, William
Engstrom, Gustav
Xepapadeas, Anastasios
Issue Date:2012
Series/Report no.:Nota di lavoro, Fondazione Eni Enrico Mattei: Climate Change and Sustainable Development 05.2012
Abstract:We develop a one-dimensional energy balance climate model with heat transportation across locations. We introduce the concept of potential world GDP at time t, and we introduce, through the temperature function, spatial characteristics into the damage function which make damages latitude dependent. We solve the social planner's problem and characterize the competitive equilibrium. We define optimal taxes on fossil fuels and profit taxes on firms that extract fossil fuels. Our results suggest that if the implementation of international transfers across latitudes is not possible, then optimal taxes are spatially non homogeneous and tend to be lower at the poor latitudes. The degree of spatial differentiation of optimal taxes depend on heat transportation. We also locate sufficient conditions for optimal mitigation policies to have rapid ramp-up initially and then decrease over time. By employing the properties of the spatial model and approximating solutions, we show how to study the impact of thermal transport across latitudes on welfare inequality.
Subjects:Energy Balance Climate Models
Heat Diffusion
Temperature Distribution
Spatial Optimal Taxes
JEL:Q54
Q58
Document Type:Working Paper
Appears in Collections:FEEM Working Papers, Fondazione Eni Enrico Mattei

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