Weighing Cows, Geoengineering and Coal Under a Climate Tipping Risk and a Temperature Target
31 Pages Posted: 4 Sep 2019 Last revised: 7 Dec 2019
Date Written: September 2, 2019
Abstract
Methane abatement and geoengineering have a short-lived effect on temperature compared with carbon abatement. Different optimal tax paths for these actions arise in a cost-benefit framework with an unknown temperature threshold where severe and irreversible climate impacts, called a tipping point, occurs. Tax paths are compared with a cost-minimising approach where an upper-temperature limit is set. In both approaches, the weight (ratio) of prices of short-lived gases to carbon prices converge to the same value by the end of the peak temperature stabilisation period. Numerical results from the cost-benefit framework suggest: the optimal weight for methane is close to the current United Nations policy of a 100-year Global Warming Potential, and the 100-year timeframe should decrease to align with the expected end of peak temperature. The use of geoengineering can lower the initial carbon tax and extend the life of the tax.
Keywords: Climate change, tipping points, optimal policy, optimal taxes, global warming potential, geoengineering
JEL Classification: H23, O44, Q30, Q40, Q54, Q56, Q58
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