Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/96856
Authors: 
Rezai, Armon
van der Ploeg, Frederick
Year of Publication: 
2014
Series/Report no.: 
CESifo Working Paper 4703
Abstract: 
The optimal social cost of carbon is in general equilibrium proportional to GDP if utility is logarithmic, production is Cobb-Douglas, depreciation in 100% every period, climate damages as fraction of production decline exponentially with the stock of atmospheric carbon, and fossil fuel extraction does not require capital. The time profile and size of the optimal carbon tax corresponding to this simple formula are not robust to more convex climate damages, smaller elasticities of factor substitution and varying coefficients of relative intergenerational inequality aversion. The optimal timing of energy transitions and the amount of fossil fuel reserves to be locked up in the earth are also not well predicted by this framework. Still, in terms of welfare and global warming the simple formula manages to get quite close to the first best.
Subjects: 
social cost of carbon
Ramsey growth
climate damages
energy transitions
stranded fossil
fuel assets
robustness
JEL: 
H21
Q51
Q54
Document Type: 
Working Paper

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