Optimum Growth and Carbon Policies with Lags in the Cllimate System

Lucas Bretschger and Christos Karydas

No 144, OxCarre Working Papers from Oxford Centre for the Analysis of Resource Rich Economies, University of Oxford

Abstract: We study the effects of greenhouse gas emissions on optimum growth and climate policy by using an endogenous growth model with polluting non-renewable resources. Climate change harms the capital stock. Our main contribution is to introduce and extensively explore the naturally determined time lag between greenhouse gas emission and the damages due to climate change, which proves to be crucial for the transition of the economy towards its steady state. The social optimum and the optimal abatement policies are fully characterized. The inclusion of a green technology delays optimal resource extraction. The optimal tax rate on emissions is proportional to output. Poor understanding of the emissions diffusion process leads to suboptimal carbon taxes and suboptimal growth and resource extraction.

Keywords: Non-Renewable Resource Dynamics; Pollution Di usion Lag; Optimum Growth; Clean Energy; Climate Policy (search for similar items in EconPapers)
JEL-codes: O11 Q32 Q52 Q54 (search for similar items in EconPapers)
Date: 2014-08-25
New Economics Papers: this item is included in nep-ene, nep-env and nep-gro
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Related works:
Journal Article: Optimum Growth and Carbon Policies with Lags in the Climate System (2018)
Working Paper: Optimum Growth and Carbon Policies with Lags in the Climate System (2017)
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Persistent link: https://EconPapers.repec.org/RePEc:oxf:oxcrwp:144

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