Optimal Climate Policy and the Future of World Economic Development

Mark Budolfson, Francis Dennig, Marc Fleurbaey, Noah Scovronick, Asher Siebert, Dean Spears, Fabian Wagner

Research output: Contribution to journalArticle

4 Scopus citations

Abstract

How much should the present generations sacrifice to reduce emissions today, in order to reduce the future harms of climate change? Within climate economics, debate on this question has been focused on so-called "ethical parameters" of social time preference and inequality aversion. We show that optimal climate policy similarly importantly depends on the future of the developing world. In particular, although global poverty is falling and the economic lives of the poor are improving worldwide, leading models of climate economics may be too optimistic about two central predictions: future population growth in poor countries, and future convergence in total factor productivity (TFP). We report results of small modifications to a standard model: under plausible scenarios for high future population growth (especially in sub-Saharan Africa) and for low future TFP convergence, we find that optimal near-term carbon taxes could be substantially larger.

Original languageEnglish (US)
Pages (from-to)21-40
Number of pages20
JournalWorld Bank Economic Review
Volume33
Issue number1
DOIs
StatePublished - Feb 1 2019

All Science Journal Classification (ASJC) codes

  • Accounting
  • Development
  • Finance
  • Economics and Econometrics

Keywords

  • carbon tax
  • climate change
  • climate policy
  • population growth
  • total factor productivity

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  • Cite this

    Budolfson, M., Dennig, F., Fleurbaey, M., Scovronick, N., Siebert, A., Spears, D., & Wagner, F. (2019). Optimal Climate Policy and the Future of World Economic Development. World Bank Economic Review, 33(1), 21-40. https://doi.org/10.1093/wber/lhx016