An Economic Anatomy of Optimal Climate Policy
38 Pages Posted: 14 Jul 2017 Last revised: 15 May 2018
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An Economic Anatomy of Optimal Climate Policy
An Economic Anatomy of Optimal Climate Policy
Date Written: May 2018
Abstract
This paper introduces geoengineering into an optimal control model of climate change economics. Together with mitigation and adaptation, carbon and solar geoengineering span the universe of possible climate policies. We show in the context of our model that: (i) a carbon tax is the optimal response to the unpriced carbon externality only if it equals the marginal cost of carbon geoengineering; (ii) the introduction of solar geoengineering leads to higher emissions yet lower temperatures, and, thus, increased welfare; and (iii) solar geoengineering, in effect, is a public goods version of adaptation that also lowers temperatures.
Keywords: Climate Change, Climate Policy, Mitigation, Adaptation, Carbon Geoengineering, Solar Geoengineering
JEL Classification: D90, O44, Q48, Q54, Q58
Suggested Citation: Suggested Citation