Consistent climate policies

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Consistent climate policies. / Gerlagh, Reyer; Liski, Matti.

In: Journal of the European Economic Association, Vol. 16, No. 1, 02.2018, p. 1-44.

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Gerlagh, Reyer ; Liski, Matti. / Consistent climate policies. In: Journal of the European Economic Association. 2018 ; Vol. 16, No. 1. pp. 1-44.

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@article{b16ac43ba89e4de3b871a7bd5af332b5,
title = "Consistent climate policies",
abstract = "What are the optimal climate policies when time preferences deviate from the standard exponential discounting and decision makers cannot commit to future policies? We show that, with time-declining discounting, the delay and persistence of climate impacts provide a commitment device to policy makers. We quantify the commitment value in a climate-economy model by solving time-consistent Markov equilibrium capital and emission taxes explicitly. The returns on capital and climate investments are no longer equal, leading to a large increase in the emission tax, compared to a benchmark with equalized returns. The commitment value increases the tax by a factor of 20 in our quantitative assessment.",
author = "Reyer Gerlagh and Matti Liski",
year = "2018",
month = "2",
doi = "10.1093/jeea/jvx010",
language = "English",
volume = "16",
pages = "1--44",
journal = "Journal of the European Economic Association",
issn = "1542-4766",
publisher = "Wiley-Blackwell",
number = "1",

}

RIS - Download

TY - JOUR

T1 - Consistent climate policies

AU - Gerlagh, Reyer

AU - Liski, Matti

PY - 2018/2

Y1 - 2018/2

N2 - What are the optimal climate policies when time preferences deviate from the standard exponential discounting and decision makers cannot commit to future policies? We show that, with time-declining discounting, the delay and persistence of climate impacts provide a commitment device to policy makers. We quantify the commitment value in a climate-economy model by solving time-consistent Markov equilibrium capital and emission taxes explicitly. The returns on capital and climate investments are no longer equal, leading to a large increase in the emission tax, compared to a benchmark with equalized returns. The commitment value increases the tax by a factor of 20 in our quantitative assessment.

AB - What are the optimal climate policies when time preferences deviate from the standard exponential discounting and decision makers cannot commit to future policies? We show that, with time-declining discounting, the delay and persistence of climate impacts provide a commitment device to policy makers. We quantify the commitment value in a climate-economy model by solving time-consistent Markov equilibrium capital and emission taxes explicitly. The returns on capital and climate investments are no longer equal, leading to a large increase in the emission tax, compared to a benchmark with equalized returns. The commitment value increases the tax by a factor of 20 in our quantitative assessment.

U2 - 10.1093/jeea/jvx010

DO - 10.1093/jeea/jvx010

M3 - Article

VL - 16

SP - 1

EP - 44

JO - Journal of the European Economic Association

JF - Journal of the European Economic Association

SN - 1542-4766

IS - 1

ER -

ID: 10404663