An Economic Anatomy of Optimal Climate Policy

38 Pages Posted: 14 Jul 2017 Last revised: 15 May 2018

See all articles by Juan Moreno-Cruz

Juan Moreno-Cruz

University of Waterloo - School of Environment, Enterprise and Development

Gernot Wagner

New York University (NYU) - Department of Environmental Studies; New York University (NYU) - Robert F. Wagner Graduate School of Public Service

David Keith

Harvard University - Harvard Kennedy School (HKS)

Multiple version iconThere are 2 versions of this paper

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

Moreno-Cruz, Juan and Wagner, Gernot and Keith, David, An Economic Anatomy of Optimal Climate Policy (May 2018). HKS Working Paper No. RWP17-028, Available at SSRN: https://ssrn.com/abstract=3001221 or http://dx.doi.org/10.2139/ssrn.3001221

Juan Moreno-Cruz

University of Waterloo - School of Environment, Enterprise and Development ( email )

Waterloo, Ontario N2L 3G1
Canada

Gernot Wagner

New York University (NYU) - Department of Environmental Studies ( email )

285 Mercer Street
New York, NY 10003
United States

New York University (NYU) - Robert F. Wagner Graduate School of Public Service ( email )

The Puck Building
295 Lafayette Street, Second Floor
New York, NY 10012
United States

David Keith (Contact Author)

Harvard University - Harvard Kennedy School (HKS) ( email )

79 John F. Kennedy Street
Cambridge, MA 02138
United States

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
90
Abstract Views
723
rank
283,980
PlumX Metrics