Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/102238 
Year of Publication: 
2014
Series/Report no.: 
CESifo Working Paper No. 4795
Publisher: 
Center for Economic Studies and ifo Institute (CESifo), Munich
Abstract: 
Economic models of climate policy (or policies to combat other environmental problems) typically neglect psychological adaptation to changing life circumstances. People may adapt or become more sensitive, to different degrees, to a deteriorated environment. The present paper addresses these issues in a simple model of tax policy to combat climate change and elaborates on the consequences for optimal climate policies and argues from a normative point of view that psychological adaptation needs to be taken into account by a pure welfarist government, which aims at internalizing an intertemporal externality.
Subjects: 
behavioral environmental economics
climate change
intertemporal externalities
adaptation
sensitization
taxation
JEL: 
D03
D61
D91
H21
Document Type: 
Working Paper
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