Pricing carbon and adjusting capital to fend off climate catastrophes
The optimal reaction to a potential productivity shock as a consequence of climate tipping is to substantially tax carbon in order to curb the risk of tipping, but to adjust capital as well in order to smooth consumption when tipping occurs. We also allow for conventional marginal climate damages an...
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| Format: | Working paper |
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University of Oxford
2018
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| _version_ | 1797089826206384128 |
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| author | Van der Ploeg, R de Zeeuw, A |
| author_facet | Van der Ploeg, R de Zeeuw, A |
| author_sort | Van der Ploeg, R |
| collection | OXFORD |
| description | The optimal reaction to a potential productivity shock as a consequence of climate tipping is to substantially tax carbon in order to curb the risk of tipping, but to adjust capital as well in order to smooth consumption when tipping occurs. We also allow for conventional marginal climate damages and decompose the optimal carbon tax in two catastrophe components and the conventional component. We distinguish constant and increasing marginal hazards. Moreover, the productivity catastrophe is compared with recoverable catastrophes and with a shock to the climate sensitivity. Finally, we allow for investments in adaptation capital as an alternative to counter the potential adverse effects of climate tipping. Quantitatively, the results are investigated with a calibrated model for the world economy. |
| first_indexed | 2024-03-07T03:09:41Z |
| format | Working paper |
| id | oxford-uuid:b3c1102a-fa48-4833-bb7e-5bb2a7b80238 |
| institution | University of Oxford |
| last_indexed | 2024-03-07T03:09:41Z |
| publishDate | 2018 |
| publisher | University of Oxford |
| record_format | dspace |
| spelling | oxford-uuid:b3c1102a-fa48-4833-bb7e-5bb2a7b802382022-03-27T04:21:28ZPricing carbon and adjusting capital to fend off climate catastrophesWorking paperhttp://purl.org/coar/resource_type/c_8042uuid:b3c1102a-fa48-4833-bb7e-5bb2a7b80238Bulk import via SwordSymplectic ElementsUniversity of Oxford2018Van der Ploeg, Rde Zeeuw, AThe optimal reaction to a potential productivity shock as a consequence of climate tipping is to substantially tax carbon in order to curb the risk of tipping, but to adjust capital as well in order to smooth consumption when tipping occurs. We also allow for conventional marginal climate damages and decompose the optimal carbon tax in two catastrophe components and the conventional component. We distinguish constant and increasing marginal hazards. Moreover, the productivity catastrophe is compared with recoverable catastrophes and with a shock to the climate sensitivity. Finally, we allow for investments in adaptation capital as an alternative to counter the potential adverse effects of climate tipping. Quantitatively, the results are investigated with a calibrated model for the world economy. |
| spellingShingle | Van der Ploeg, R de Zeeuw, A Pricing carbon and adjusting capital to fend off climate catastrophes |
| title | Pricing carbon and adjusting capital to fend off climate catastrophes |
| title_full | Pricing carbon and adjusting capital to fend off climate catastrophes |
| title_fullStr | Pricing carbon and adjusting capital to fend off climate catastrophes |
| title_full_unstemmed | Pricing carbon and adjusting capital to fend off climate catastrophes |
| title_short | Pricing carbon and adjusting capital to fend off climate catastrophes |
| title_sort | pricing carbon and adjusting capital to fend off climate catastrophes |
| work_keys_str_mv | AT vanderploegr pricingcarbonandadjustingcapitaltofendoffclimatecatastrophes AT dezeeuwa pricingcarbonandadjustingcapitaltofendoffclimatecatastrophes |