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Publication year
Steering the Climate System: Using Inertia to Lower the Cost of Policy
Resource type
Authors/contributors
- Lemoine, Derek (Author)
- Rudik, Ivan (Author)
Title
Steering the Climate System: Using Inertia to Lower the Cost of Policy
Abstract
Common views hold that the efficient way to limit warming to a chosen level is to price carbon emissions at a rate that increases exponentially. We show that this Hotelling tax on carbon emissions is actually inefficient. The least-cost policy path takes advantage of the climate system's inertia to delay reducing emissions and allow greater cumulative emissions. The efficient carbon tax follows an inverse-U-shaped path and grows more slowly than the Hotelling tax. Economic models that assume exponentially increasing carbon taxes are overestimating the cost of limiting warming, overestimating the efficient near-term carbon tax, and overvaluing technologies that mature sooner.
Publication
American Economic Review
Volume
107
Issue
10
Pages
2947-57
Date
2017-10
Citation
Lemoine, D., & Rudik, I. (2017). Steering the Climate System: Using Inertia to Lower the Cost of Policy. American Economic Review, 107, 2947–2957.
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