Selfish incentives for climate policy: Empower the young!

77 Pages Posted: 11 Oct 2021

See all articles by Larry S. Karp

Larry S. Karp

University of California, Berkeley

Alessandro Peri

University of Colorado Boulder

Armon Rezai

Vienna University of Economics and Business

Date Written: September 30, 2021

Abstract

Currently living agents might have selfish reasons to undertake climate policy, because young agents benefit in the future from an improved climate, and policy affects the asset price. Previous models downplayed the first factor and assumed away the second. Self-interested incentives induce meaningful climate policy over a period of several generations, if the young have substantial policy-making influence. Policy is largely driven by the young generation’s concern about its future consumption, not from endogenous asset prices. For small climate policy, the old and young generations’ incentives are aligned if and only if the elasticity of intertemporal substitution exceeds 1.

Keywords: Climate externality, overlapping generations, climate policy, generational conflict, Markov perfection, adjustment costs; concave production possibility frontier

JEL Classification: E24, H23, Q20, Q52, Q54

Suggested Citation

Karp, Larry S. and Peri, Alessandro and Rezai, Armon, Selfish incentives for climate policy: Empower the young! (September 30, 2021). Available at SSRN: https://ssrn.com/abstract=3933987 or http://dx.doi.org/10.2139/ssrn.3933987

Larry S. Karp

University of California, Berkeley ( email )

Dept. of Agriculture & Resource Economics
313 Giannini Hall
Berkeley, CA 94720
United States
510-643-8911 (Fax)

Alessandro Peri (Contact Author)

University of Colorado Boulder ( email )

Economics Building Rm 212 256 UCB
Boulder, CO 80309-0256
United States

HOME PAGE: http://https://www.colorado.edu/economics/people/faculty/alessandro-peri

Armon Rezai

Vienna University of Economics and Business ( email )

Welthandelsplatz 1
Vienna, Wien 1020
Austria

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