ACE - Analytic Climate Economy

64 Pages Posted: 31 Mar 2021

See all articles by Christian P. Traeger

Christian P. Traeger

University of Oslo - Department of Economics; CESifo (Center for Economic Studies and Ifo Institute) - Ifo Institute

Multiple version iconThere are 2 versions of this paper

Date Written: March 1, 2021

Abstract

The paper discusses optimal carbon taxation in an analytic quantitative integrated assessment model (IAM). The model links IAM components and parametric assumptions directly to their policy impacts. The paper discusses the distinct tax impact of carbon versus temperature dynamics and uses the see-through model to illustrate various aspects of IAM calibrations including the differentiation between consumption and investments goods. Novel to analytic IAMs are the explicit temperature dynamics, a general economy, energy sectors including capital, various degrees of substitutability across energy sources, an approximation of capital persistence, and objective functions that include CES preferences and population weighting. ACE opens the door to tractable forward-looking stochastic modeling and dynamic strategic interactions in complex IAMs, explored in accompanying work.

JEL Classification: D61, D80, E13, H23, H43, Q54

Suggested Citation

Traeger, Christian P., ACE - Analytic Climate Economy (March 1, 2021). CEPR Discussion Paper No. DP15968, Available at SSRN: https://ssrn.com/abstract=3816853

Christian P. Traeger (Contact Author)

University of Oslo - Department of Economics ( email )

Norway

CESifo (Center for Economic Studies and Ifo Institute) - Ifo Institute ( email )

Poschinger Str. 5
Munich, 01069
Germany

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