Carbon prices for the next hundred years

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  • Tilburg University

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.

Details

Original languageEnglish
Article number10.1111/ecoj.12436
Pages (from-to)728–757
Number of pages30
JournalECONOMIC JOURNAL
Volume128
Issue number609
Early online date22 Oct 2016
Publication statusPublished - 2018
MoE publication typeA1 Journal article-refereed

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