Optimal carbon pricing in general equilibrium: temperature caps and stranded assets in an extended annual DSGE model
The general equilibrium model developed by Golosov et al. (2014), GHKT for short, is modified to allow for additional negative impacts of global warming on utility and productivity growth, mean reversion in the ratio of climate damages to production, labour-augmenting technical progress, and populat...
| Main Authors: | , |
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| 格式: | Working paper |
| 語言: | English |
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University of Oxford
2021
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| _version_ | 1826281418320248832 |
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| author | Van Der Ploeg, F Rezai, A |
| author_facet | Van Der Ploeg, F Rezai, A |
| author_sort | Van Der Ploeg, F |
| collection | OXFORD |
| description | The general equilibrium model developed by Golosov et al. (2014), GHKT for short, is modified to allow for additional negative impacts of global warming on utility and productivity growth, mean reversion in the ratio of climate damages to production, labour-augmenting technical progress, and population growth. We also replace the GHKT assumption of full depreciation of capital each decade by annual logarithmic depreciation. Furthermore, we allow the government to use a lower discount rate than the private sector. We derive a tractable rule for the optimal carbon price for each of these extensions. We then simplify the GHKT model by modelling temperature as cumulative emissions and calibrating it to Burke et al. (2015) damages. Finally, we consider how the rule for the optimal carbon price must be modified to allow for a temperature cap, and what this implies for stranded oil and gas reserves. We illustrate our analytical results with a range of optimal policy simulations. |
| first_indexed | 2024-03-07T00:28:30Z |
| format | Working paper |
| id | oxford-uuid:7ef3ad7e-c768-4ab3-9d22-615f7a170b1a |
| institution | University of Oxford |
| language | English |
| last_indexed | 2024-03-07T00:28:30Z |
| publishDate | 2021 |
| publisher | University of Oxford |
| record_format | dspace |
| spelling | oxford-uuid:7ef3ad7e-c768-4ab3-9d22-615f7a170b1a2022-03-26T21:13:37ZOptimal carbon pricing in general equilibrium: temperature caps and stranded assets in an extended annual DSGE modelWorking paperhttp://purl.org/coar/resource_type/c_8042uuid:7ef3ad7e-c768-4ab3-9d22-615f7a170b1aEnglishSymplectic ElementsUniversity of Oxford2021Van Der Ploeg, FRezai, AThe general equilibrium model developed by Golosov et al. (2014), GHKT for short, is modified to allow for additional negative impacts of global warming on utility and productivity growth, mean reversion in the ratio of climate damages to production, labour-augmenting technical progress, and population growth. We also replace the GHKT assumption of full depreciation of capital each decade by annual logarithmic depreciation. Furthermore, we allow the government to use a lower discount rate than the private sector. We derive a tractable rule for the optimal carbon price for each of these extensions. We then simplify the GHKT model by modelling temperature as cumulative emissions and calibrating it to Burke et al. (2015) damages. Finally, we consider how the rule for the optimal carbon price must be modified to allow for a temperature cap, and what this implies for stranded oil and gas reserves. We illustrate our analytical results with a range of optimal policy simulations. |
| spellingShingle | Van Der Ploeg, F Rezai, A Optimal carbon pricing in general equilibrium: temperature caps and stranded assets in an extended annual DSGE model |
| title | Optimal carbon pricing in general equilibrium: temperature caps and stranded assets in an extended annual DSGE model |
| title_full | Optimal carbon pricing in general equilibrium: temperature caps and stranded assets in an extended annual DSGE model |
| title_fullStr | Optimal carbon pricing in general equilibrium: temperature caps and stranded assets in an extended annual DSGE model |
| title_full_unstemmed | Optimal carbon pricing in general equilibrium: temperature caps and stranded assets in an extended annual DSGE model |
| title_short | Optimal carbon pricing in general equilibrium: temperature caps and stranded assets in an extended annual DSGE model |
| title_sort | optimal carbon pricing in general equilibrium temperature caps and stranded assets in an extended annual dsge model |
| work_keys_str_mv | AT vanderploegf optimalcarbonpricingingeneralequilibriumtemperaturecapsandstrandedassetsinanextendedannualdsgemodel AT rezaia optimalcarbonpricingingeneralequilibriumtemperaturecapsandstrandedassetsinanextendedannualdsgemodel |