Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/171627
Authors: 
Bretschger, Lucas
Karydas, Christos
Year of Publication: 
2017
Series/Report no.: 
Economics Working Paper Series 13/184
Abstract: 
We study the effects of greenhouse gas emissions on optimum growth and environmental policy by using an expansion-in-varieties growth model with polluting non-renewable resources. Climate change harms the capital stock. Our main contribution is to introduce and extensively explore the naturally determined time lag between greenhouse gas emission and the damages due to climate change which proves to be crucial for the transition of the economy towards its steady state. The social optimum and optimal abatement policies are fully characterized. The inclusion of a green technology delays optimal resource extraction. The optimal tax rate on emissions is proportional to output. Poor understanding of the emissions diffusion process leads to suboptimal carbon taxes and suboptimal growth and resource extraction.
Subjects: 
Climate Policy
Non-Renewable Resource Dynamics
Pollution Diffusion Lag
Optimum Growth
JEL: 
Q54
O11
Q52
Q32
Document Type: 
Working Paper

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