Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/271922 
Year of Publication: 
2023
Series/Report no.: 
CESifo Working Paper No. 10278
Publisher: 
Center for Economic Studies and ifo Institute (CESifo), Munich
Abstract: 
We develop a financial-economic model for carbon pricing with an explicit representation of decision making under risk and uncertainty that is consistent with the Intergovernmental Panel on Climate Change's sixth assessment report. We find that this approach provides economic support for the warming targets in the Paris Agreement across a variety of specifications. We show that risk associated with high damages in the long term leads to stringent mitigation of carbon dioxide emissions in the near term. Our results provide insight into how a systematic incorporation of climate-related risk influences 'optimal' emissions abatement pathways.
Subjects: 
climate risk
asset pricing
cost of carbon
JEL: 
G00
G12
Q51
Q54
Document Type: 
Working Paper
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