2021
DOI: 10.1007/s10797-021-09686-x
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Carbon pricing under uncertainty

Abstract: Economists have adopted the Pigouvian approach to climate policy, which sets the carbon price to the social cost of carbon. We adjust this carbon price for macroeconomic uncertainty and disasters by deriving the risk-adjusted discount rate. We highlight ethics- versus market-based calibrations and discuss the effects of a falling term structure of the discount rate. Given the wide range of estimates used for marginal damages and the discount rate, it is unsurprising that negotiators and policy makers have reje… Show more

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Cited by 8 publications
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References 87 publications
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