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An explicit formula for optimal carbon taxes under general economic settings
Uppsala University, Disciplinary Domain of Humanities and Social Sciences, Faculty of Social Sciences, Department of Economics.
2018 (English)Report (Other academic)
Abstract [en]

The paper develops an explicit formula for the calculation of optimal carbon taxes in adynamic integrated assessment framework. We attempt to generalize the Gosolov et al. (2014) theory by relaxing the restrictions with logarithmic preferences, Cobb-Douglas production and the full periodwise capital depreciation. By taking advantage of the cumulative climate response (CCR) function, we show that all that matters for the tax formula from the economic module pins down to a single economic parameter i.e. a weighted harmonic mean of the growth-adjusted consumption rate of discount. We demonstrate the theory with a stylized climate-economy model with depletable fossil resources, test the formula with the new DICE2016 model, and provide an application to the real world economy beyond any integrated modeling framework.

Place, publisher, year, edition, pages
Uppsala: Nationalekonomiska institutionen , 2018. , p. 24
Series
Working paper / Department of Economics, Uppsala University (Online), ISSN 1653-6975 ; 2018:1
Keywords [en]
Climate change, analytical integrated assessment, optimal carbon tax, harmonic mean, DICE model
National Category
Economics
Identifiers
URN: urn:nbn:se:uu:diva-341099OAI: oai:DiVA.org:uu-341099DiVA, id: diva2:1180782
Available from: 2018-02-06 Created: 2018-02-06 Last updated: 2018-02-08Bibliographically approved

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Li, Chuan-Zhong
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CiteExportLink to record
Permanent link

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Citation style
  • apa
  • ieee
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  • vancouver
  • Other style
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  • de-DE
  • en-GB
  • en-US
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  • nn-NB
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  • Other locale
More languages
Output format
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