Carbon prices for the next hundred years
Gerlagh,Reyer Liski,M.
Gerlagh,Reyer
Liski,M.
Abstract
This paper examines the socially optimal pricing of carbon emissions over time when climate-change impacts are unknown, potentially high-consequence events. The carbon price tends to increase with income. But learning about impacts, or their absence, decouples the carbon price from income growth. The price should grow faster than the economy if the past warming is not substantial enough for learning the true long-run social cost. It grows slower than the economy as soon as the warming generates information about events that could have arrived but have not done so. A quantitative assessment shows that the price grows roughly at the rate of the economy for the next 100 years.
Description
Date
2018-03
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Research Projects
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Keywords
carbon price, climate change, learning, tipping point, H43 - Project Evaluation ; Social Discount Rate, H41 - Public Goods, D61 - Allocative Efficiency ; Cost–Benefit Analysis, D91 - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making, Q54 - Climate ; Natural Disasters and Their Management ; Global Warming, E21 - Consumption ; Saving ; Wealth, SDG 8 - Decent Work and Economic Growth, SDG 13 - Climate Action
Citation
Gerlagh, R & Liski, M 2018, 'Carbon prices for the next hundred years', Economic Journal, vol. 128, no. 609, pp. 728-757. https://doi.org/10.1111/ecoj.12436