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Contribution Details

Type Conference Presentation
Scope Discipline-based scholarship
Title Can Today's and Tomorrow's World Uniformly Gain from Carbon Taxation?
Organization Unit
  • Felix Kübler
  • Laurence Kotlikoff
  • Andrey Polbin
  • Simon Scheidegger
Presentation Type paper
Item Subtype Original Work
Refereed Yes
Status Published electronically before print/final form (Epub ahead of print)
  • English
Event Title Philadelphia Workshop on Macroeconomics & Economic Policy
Event Type workshop
Event Location Philadelphia US
Event Start Date May 19 - 2022
Event End Date May 20 - 2022
Abstract Text Climate change will impact current and future generations in different regions very differently. This paper develops the first large-scale, annually calibrated, multi-region, overlapping generations model of climate change and carbon policy. It features region-specific temperature and damage functions with the phased impact of emissions on global and regional temperature calibrated to the latest scientific evidence. Absent policy, calibrated worst-case damages in the next 200 years reach and remain near 20 percent of GDP for most regions, with India, Brazil, and the South Asian Pacific suffering roughly 40 percent of GDP losses. Russia and Canada benefit somewhat from global warming. Carbon taxation, coupled with region- and generation-specific transfers, can both correct the carbon externality and raise the welfare of all current and future agents across all regions by 4.3 percent. The impact on the use and duration of fossil fuels is dramatic, as is the reduction in the path of global emissions. However, achieving completely uniform welfare gains leaves future generations in particular regions with exceptionally high net taxes. Fortunately, a carbon tax-cum redistribution policy that limits the consumption-equivalent net tax burden on any generation in any region to less than 10 percent can deliver a 4.0 percent or higher welfare gain for all peoplekind – present and future. However, carbon taxes set through time, at carbon’s marginal intertemporal social cost do far too little to mitigate climate change unless all major emitters, particularly China, adopt them and do so immediately.
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