Abstract:
An extensive climate policy literature provides various recommendations, but they are not supported democratically since the models employed consider either infinitely-lived individuals or normative social objectives (or both). In contrast, the present paper provides policy recommendations that are able to go through democratic processes. I develop an overlapping generation model with political process micro-foundations. I analyze how democratic policies, which are directly and indirectly related to climate change, differ from standard recommended policies. The novel politico-economic formula derived for the interest rate highlights that individual pure time preference, individual altruism toward descendants, and young generation political power are key determinants of democratic climate policy ambition.
