Global Warming and Economic Externalities

Rezai, Armon; Foley, Duncan K.; Taylor, Lance

doi:10.1007/978-3-319-31943-8_20

Cited by 20 publications

(22 citation statements)

References 15 publications

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“…Rezai, Foley and Taylor, 2012), are negligible with respect to capital depreciation ε δ, the previous relation can be approximated bȳ m = m 0 + G k 0 δ , which is also simply the maximum of the solution of (D1) when ε = 0.…”

Section: Appendixmentioning

confidence: 99%

Instrument Choice and Stranded Assets in the Transition to Clean Capital

Rozenberg

Vogt-Schilb

Hallegatte

2017

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To mitigate climate change, some governments opt for instruments focused on investment, like performance standards or feebates, instead of carbon prices. We compare these policies in a Ramsey model with clean and polluting capital, irreversible investment and a climate constraint. Alternative instruments imply different transitions to the same balanced growth path. The optimal carbon price minimizes the discounted social cost of the transition to clean capital, but imposes immediate private costs that disproportionately affect the current owners of polluting capital, in particular in the form of stranded assets. A phased-in carbon price can avoid stranded assets but still result in a drop of income for the owners of polluting capital when it is implemented. Secondbest standards or feebates on new investment lead to higher total costs but avoid stranded assets, preserve the revenues of vested interests, and smooth abatement costs over individuals and time. These results suggest a trade-off between political feasibility and cost-effectiveness of environmental policies.JEL: L50, O33, O44, Q52, Q54, Q58

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Section: Appendixmentioning

confidence: 99%

Instrument Choice and Stranded Assets in the Transition to Clean Capital

Rozenberg

Vogt-Schilb

Hallegatte

2017

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“…The initial capital stock is set to 200 (US$ trillion), which is taken from Rezai et al (2012). We set the depreciation rate δ to be 0.1 per year.…”

Section: Initial Capital Stock and Depreciation Ratementioning

confidence: 99%

Second-Best Renewable Subsidies to De-carbonize the Economy: Commitment and the Green Paradox

Rezai

Ploeg

2016

Environ Resource Econ

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Climate change must deal with two market failures: global warming and learning by doing in renewable energy production. The first-best policy consists of an aggressive renewables subsidy in the near term and a gradually rising and falling carbon tax. Given that global carbon taxes remain elusive, policy makers might have to rely on a second-best subsidy only. With credible commitment the second-best subsidy is higher than the social benefit of learning to cut the transition time and peak warming close to first-best levels at the cost of higher fossil fuel use in the short run (weak Green Paradox). Without commitment the second-best subsidy is set to the social benefit of learning. It generates smaller weak Green Paradox effects, but the transition to the carbon-free takes longer and cumulative carbon emissions are higher. Under first best and second best with pre-commitment peak warming

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“…This is because, according to the standard model logic, utility increases with consumption, and thus a reduction in consumption would imply a sacrifice. See also [17][18][19] on this issue: Rezai and colleagues argue that the business-as-usual scenario commonly chosen as a reference is problematic. In the BAU case (an equilibrium of the economy with an externality), agents ignore the effects of their emissions.…”

Section: Mechanisms That Lead To Lower Cost (Or Even Net Benefit) Estmentioning

confidence: 99%

Balance or Synergies between Environment and Economy—A Note on Model Structures

2016

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Abstract:The UN sustainable development goals contain environmental, economic, and social objectives. They may only be reached, or at least it would be easier to reach them, if instead of a trade-off between these objectives that implies a need for balancing them, there are synergies to be reaped. This paper discusses how the structures of economic models typically used in policy analysis influence whether win-win strategies for the environment and the economy can be conceptualised and analysed. With a focus on climate policy modelling, the paper points out how, by construction, commonly used model structures find mitigation costs rather than benefits. This paper describes mechanisms that, when added to these model structures, can bring win-win options into a model's solution horizon, and which provide a spectrum of alternative modelling approaches that allow for the identification of such options.

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Global Warming and Economic Externalities

Cited by 20 publications

References 15 publications

Instrument Choice and Stranded Assets in the Transition to Clean Capital

Instrument Choice and Stranded Assets in the Transition to Clean Capital

Second-Best Renewable Subsidies to De-carbonize the Economy: Commitment and the Green Paradox

Balance or Synergies between Environment and Economy—A Note on Model Structures

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