The Optimal Carbon Tax With a Tipping Climate and Peak Temperature

31 Pages Posted: 4 Sep 2019 Last revised: 10 Dec 2019

See all articles by Anthony Wiskich

Anthony Wiskich

Centre for Applied Macroeconomic Analysis, ANU

Date Written: September 2, 2019

Abstract

This paper describes an integrated assessment model with an unknown temperature threshold where severe and irreversible climate impacts, called a tipping point, occurs. The possibility of tipping leads to the following linked outcomes: a prolonged period of peak temperature; a rebound in emissions prior to and during peak temperature; and a fall in the optimal carbon tax as a ratio of output prior to and during peak temperature. Although tipping can occur in any period where temperature rises to a new maximum, the optimal carbon price can be calculated from future temperature outcomes conditional on no tipping. Learning that tipping has not occurred lowers the tax.

Keywords: climate change, tipping points, optimal policy, optimal taxes

JEL Classification: H23, O44, Q30, Q40, Q54, Q56, Q58

Suggested Citation

Wiskich, Anthony, The Optimal Carbon Tax With a Tipping Climate and Peak Temperature (September 2, 2019). CAMA Working Paper No. 64/2019, Available at SSRN: https://ssrn.com/abstract=3446457 or http://dx.doi.org/10.2139/ssrn.3446457

Anthony Wiskich (Contact Author)

Centre for Applied Macroeconomic Analysis, ANU ( email )

Australia

Do you have negative results from your research you’d like to share?

Paper statistics

Downloads
67
Abstract Views
550
Rank
608,356
PlumX Metrics