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

Abstract

Cumulative emissions, unburnable fossil fuel, and the optimal carbon tax Article (Published) (Refereed) 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.

Enhancing ICT for Environmental Sustainability in Sub-Saharan Africa

“…The above positioning is also an extension of recent technological foresight literature on the role of technology and innovation in sustaining development and corporate outcomes, notably: the exploration of battery technology for grid-related energy storage (Versteeg et al, 2017); techno-organisational decarbonisation (Mazzanti & Rizzo, 2017); the importance of technology in consolidating the petroleum and petrochemical industry (Hossani et al, 2017); the relevance of environmental innovation in marketing capacity (Yu et al, 2017); linkages between unburnable fossil fuel, cumulative emissions and optimal carbon tax (van de Ploeg & Rezai, 2017) and the connection of innovation ecosystems (Pombo-Juárez et al, 2017).…”

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“…In our model, instead, we consider policies that could work at any degree of environmental degradation, even if the South has home-consumption of polluting goods, and even in the presence of large endowments of fossil fuels that will not become scarce any time in the near future. This last point is based on current research on stranded carbon assets, which argues that fossil fuel resources are too abundant to rely on their exhaustibility to prevent a climate disaster under business as usual (Jakob and Hilaire 2015;van der Ploeg and Rezai 2017). Therefore, in our model we assume that scarcity does not limit the availability of fossil fuel deposits within the time horizon under consideration.…”

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