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Prix FAERE du meilleur article de jeunes économistes

lundi 14 septembre 2020, par Arancha Sánchez

Optimal climate policy when warming rate matters


Nicolas Taconet (CIRED, ENPC)

Abstract


Studies of the Social Cost of Carbon assume climate change is a stock externality
for which damages stem from warming level. However, economic and natural systems
are also sensitive to the rate at which warming occurs. In this paper, I study the
optimal carbon tax when such a feature is accounted for. I show that damages caused
by warming rates do not affect optimal long-term warming, but they delay the use of
the same carbon budget. Numerically, optimal carbon price should be 39% higher,
compared to when damages solely stem from warming level.


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