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Contribution Details

Type Journal Article
Scope Discipline-based scholarship
Title Pareto-Improving Carbon-Risk Taxation
Organization Unit
Authors
  • Laurence Kotlikoff
  • Felix Kübler
  • Andrey Polbin
  • Simon Scheidegger
Item Subtype Original Work
Refereed Yes
Status Published in final form
Language
  • English
Journal Title Economic Policy
Publisher Oxford University Press
Geographical Reach international
ISSN 0266-4658
Volume 36
Number 107
Page Range 551 - 589
Date 2021
Abstract Text Anthropogenic climate change produces two conceptually distinct negative economic externalities. The first is an expected path of climate damage. The second, the focus of this paper, is an expected path of economic risk. To isolate the climate-risk problem, we consider three mean-zero, symmetric shocks in our 12-period, overlapping generations model. These shocks impact dirty energy usage (carbon emissions), the relationship between carbon concentration and temperature and the connection between temperature and damages. By construction, our model exhibits a de minimis climate problem absent its shocks. However, due to non-linearities, symmetric shocks deliver negatively skewed impacts, including the potential for climate disasters. As we show, Pareto-improving carbon taxation can dramatically lower climate risk, in general, and disaster risk, in particular. The associated climate-risk tax, which is focused exclusively on limiting climate risk, can be as large as, or larger than, the carbon average-damage tax, which is focused exclusively on limiting average damage.
Official URL https://academic.oup.com/economicpolicy/article/36/107/551/6133259?login=true
Digital Object Identifier 10.1093/epolic/eiab008
Other Identification Number merlin-id:20434
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