An Economic Anatomy of Optimal Climate Policy

Together with mitigation and adaptation, carbon and solar geoengineering span the universe of possible climate policies.

Abstract:

This paper introduces geoengineering into an optimal control model of climate change economics. Together with mitigation and adaptation, carbon and solar geoengineering span the universe of possible climate policies. We show in the context of our model that: (i) a carbon tax is the optimal response to the unpriced carbon externality only if it equals the marginal cost of carbon geoengineering; (ii) the introduction of solar geoengineering leads to higher emissions yet lower temperatures, and, thus, increased welfare; and (iii) solar geoengineering, in effect, is a public goods version of adaptation that also lowers temperatures.

Full text: “An Economic Anatomy of Optimal Climate Policy” (version: 14 July 2017)

Citation:

Moreno-Cruz, Juan B., Gernot Wagner, and David W. Keith. “An Economic Anatomy of Optimal Climate Policy.” HKS Faculty Research Working Paper Series RWP17-028 (14 July 2017).

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