Cumulative emissions, unburnable fossil fuel, and the optimal carbon tax

van der Ploeg, Frederick and Rezai, Armon (2017) Cumulative emissions, unburnable fossil fuel, and the optimal carbon tax. Technological Forecasting and Social Change, 116. pp. 216-222. ISSN 0040-1625

Available under License Creative Commons: Attribution 4.0 International (CC BY 4.0).

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A stylised analytical framework is used to show how the global carbon tax and the amount of untapped fossil fuel can be calculated from a simple rule given estimates of society's rate of time impatience and intergenerational inequality aversion, the extraction cost technology, the rate of technical progress in renewable energy and the future trend rate of economic growth. The predictions of the simple framework are tested in a calibrated numerical and more complex version of the integrated assessment model (IAM). This IAM makes use of the Oxford carbon cycle of Allen et al. (2009), which differs from DICE, FUND and PAGE in that cumulative emissions are the key driving force of changes in temperature. We highlight the importance of the speed and direction of technological change for the energy transition and how time impatience, intergenerational inequality aversion and expected trend growth affect the time paths of the optimal global carbon tax and the optimal amount of fossil fuel reserves to leave untapped. We also compare these with the adverse global warming trajectories that occur if no policy actions are taken.

Item Type: Article
Additional Information: Support from ERC Advanced Grant 'Political Economy of Green Paradoxes' (FP7-IDEAS-ERC Grant No. 269788) and the BP funded Oxford Centre for the Analysis of Resource Rich Economies; support from the Austrian Science Fund (FWF): J3633 and the OeNB Anniversary Fund (grant no. 15330). Open Access funded by European Research Council.
Keywords: energy transition / optimal carbon tax / unburnable fossil fuel / cumulative emissions / Oxford carbon cycle / trend growth
Divisions: Departments > Sozioökonomie > Ecological Economics
Forschungsinstitute > Verteilungsfragen
Version of the Document: Published
Variance from Published Version: None
Depositing User: Elena Simukovic
Date Deposited: 12 Dec 2016 10:58
Last Modified: 23 May 2017 16:17
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