Evidence for and Modelling of a Decreasing Long-Run Elasticity of Substitution between Clean and Dirty Energy

The Optimal Carbon Tax with An Endogenous Chance of a Tipping Climate

“…Damages are an exponential function of temperature, as used by Gerlagh and Liski 2018 Oil has been separated from other energy (coal and clean) so that a lower elasticity of substitution can be applied, reflecting evidence of high substitutability between clean and dirty inputs in electricity (Wiskich, 2019a). The Cobb Douglas formulation also leads to easier computation under uncertainty as described below.…”