Steering the Climate System: Using Inertia to Lower the Cost of Policy

Date
2015-07-01
Authors
Lemoine, Derek
Rudik, Ivan
Journal Title
Journal ISSN
Volume Title
Publisher
Altmetrics
Authors
Rudik, Ivan
Person
Research Projects
Organizational Units
Economics
Organizational Unit
Journal Issue
Series
Abstract

Conventional wisdom holds that the efficient way to limit warming to a chosen level is to price carbon emissions at a rate that increases exponentially. We show that this “Hotelling” tax on carbon emissions is actually inefficient. The least-cost policy path takes advantage of the climate system’s inertia by growing more slowly than exponentially. Carbon dioxide temporarily overshoots the steady-state level consistent with the temperature limit, and the efficient carbon tax follows an inverse-U-shaped path. Economic models that assume exponentially increasing carbon taxes are overestimating the minimum cost of limiting warming, overestimating the efficient near-term carbon tax, and overvaluing technologies that mature sooner.

Description
Keywords
climate, hotelling, emissions, inertia, tax, carbon, abatement, dynamics
Citation
DOI
Source
Collections