Making carbon taxation a generational win win
Files
Accepted manuscript
Date
2021-02
Authors
Kotlikoff, Laurence
Kubler, Felix
Polbin, Andrey
Sachs, Jeffrey
Scheidegger, Simon
Version
OA Version
Published version
Citation
Laurence Kotlikoff, Felix Kubler, Andrey Polbin, Jeffrey Sachs, Simon Scheidegger. 2021. "MAKING CARBON TAXATION A GENERATIONAL WIN WIN." International Economic Review, Volume 62, Issue 1, pp. 3 - 46. https://doi.org/10.1111/iere.12483
Abstract
Carbon taxation is mostly studied in social planner or infinitely lived-agent models, which obscure carbon
taxation’s potential to produce a generational win win. This article’s large-scale, dynamic 55-period, overlap-
ping generations model calculates the carbon tax policy delivering the highest uniform welfare gain to all current and future generations. Our model features coal, oil, and gas, increasing extraction costs, clean energy,
technical and demographic change, and Nordhaus’ carbon/temperature/damage functions. Assuming high-end
carbon damages, the optimal carbon tax is $70, rising annually at 1.5%. This policy raises all generations’ welfare by almost 5%. However, doing so requires major intergenerational redistribution.
Description
License
© 2019 by Laurence J. Kotlikoff, Felix Kubler, Andrey Polbin, Jeffrey D. Sachs, and Simon Scheidegger. All rights reserved. Short sections of text, not to exceed two paragraphs, may be quoted without explicit permission provided that full credit, including © notice, is given to the source.