Global Demographic Change and Climate Policies
CentER Discussion Paper Series No. 2017-035
46 Pages Posted: 22 Sep 2017
Date Written: September 7, 2017
Between 1950 and 2017, world average life expectancy increased from below-50 to above-70, while the fertility rate dropped from 5 to about 2.5. We develop and calibrate an analytic climate-economy model with overlapping generations to study the effect of such demographic change on capital markets and optimal climate policies. Our model replicates findings from the OLG-demography literature, such as a rise in households’ savings, and a declining rate of return to capital. We also find that demographic change raises the social cost of carbon, at 2020, from 28 euro/tCO2 in a model that abstracts from demography, to 94 euro/tCO2 in our calibrated model.
Keywords: Climate Change, Social Cost of Carbon, Environmental Policy, Demographic Trends
JEL Classification: H23, J11, Q54, Q58
Suggested Citation: Suggested Citation