Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/197653
Authors: 
Li, Chuan-Zhong
Year of Publication: 
2018
Series/Report no.: 
Working Paper 2018:1
Abstract: 
The paper develops an explicit formula for the calculation of optimal carbon taxes in a dynamic integrated assessment framework. We attempt to generalize the Gosolov et al. (2014) theory by relaxing the restrictions with logarithmic preferences, Cobb-Douglas production and the full periodwise capital depreciation. By taking advantage of the cumulative climate response (CCR) function, we show that all that matters for the tax formula from the economic module pins down to a single economic parameter i.e. a weighted harmonic mean of the growth-adjusted consumption rate of discount. We demonstrate the theory with a stylized climate-economy model with depletable fossil resources, test the formula with the new DICE2016 model, and provide an application to the real world economy beyond any integrated modeling framework.
Subjects: 
Climate change
analytical integrated assessment
optimal carbon tax
harmonic mean
DICE model
JEL: 
H21
Q43
Q54
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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