Spatial Climate-Economic Models in the Design of Optimal Climate Policies across Locations

52 Pages Posted: 11 Oct 2012

See all articles by William A. Brock

William A. Brock

University of Wisconsin, Madison - Department of Economics; University of Missouri at Columbia - Department of Economics

Gustav Engstrom

The Beijer Institute of Ecological Economics

Anastasios Xepapadeas

Athens University of Economics and Business; University of Bologna - School of Economics, Management, and Statistics

Multiple version iconThere are 2 versions of this paper

Date Written: October 10, 2012

Abstract

We couple a one-dimensional energy balance climate model with heat transportation across latitudes, with an economic growth model. We derive temperature and damage distributions across locations and optimal taxes on fossil fuels which, in contrast to zero-dimensional Integrated Assessment Models, account for cross latitude externalities. We analyze the impact of welfare weights on the spatial structure of optimal carbon taxes and identify conditions under which these taxes are spatially non-uniform and are lower in latitudes with relatively lower per capita income populations. We show the way that heat transportation affects local economic variables and taxes, and locate sufficient conditions for optimal mitigation policies to have rapid ramp-up initially and then decrease over time.

Keywords: one-dimensional energy balance model, heat transport, latitudes, temperature distribution, damage distribution, social planner, competitive equilibrium, local welfare weights, optimal taxes

JEL Classification: Q54, Q58, R11

Suggested Citation

Brock, William A. and Engstrom, Gustav and Xepapadeas, Anastasios, Spatial Climate-Economic Models in the Design of Optimal Climate Policies across Locations (October 10, 2012). RDCEP Working Paper No. 12-11, Available at SSRN: https://ssrn.com/abstract=2037849 or http://dx.doi.org/10.2139/ssrn.2037849

William A. Brock

University of Wisconsin, Madison - Department of Economics ( email )

1180 Observatory Drive
Madison, WI 53706
United States
608-263-6655 (Phone)
608-263-3876 (Fax)

University of Missouri at Columbia - Department of Economics ( email )

118 Professional Building
Columbia, MO 65211
United States

Gustav Engstrom (Contact Author)

The Beijer Institute of Ecological Economics ( email )

Stockholm, SE-104 05
Sweden

Anastasios Xepapadeas

Athens University of Economics and Business ( email )

76 Patission Street
Athens, 104 34
Greece

University of Bologna - School of Economics, Management, and Statistics ( email )

Piazza Scaravilli 1
40126 Bologna, fc 47100
Italy

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