Climate Policy under Cooperation and Competition between Regions with Spatial Heat Transport / Yongyang Cai, William Brock, Anastasios Xepapadeas, Kenneth Judd.

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Cai, Yongyang

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Material type: Text

TextSeries: Working Paper Series (National Bureau of Economic Research) ; no. w24473.Publication details: Cambridge, Mass. National Bureau of Economic Research 2018.Description: 1 online resource: illustrations (black and white)Subject(s):

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Abstract: We build a novel stochastic dynamic regional integrated assessment model (IAM) of the climate and economic system including a number of important climate science elements that are missing in most IAMs. These elements are spatial heat transport from the Equator to the Poles, sea level rise, permafrost thaw and tipping points. We study optimal policies under cooperation and noncooperation between two regions (the North and the Tropic-South) in the face of risks and recursive utility. We introduce a new general computational algorithm to find feedback Nash equilibrium. Our results suggest that when the elements of climate science are ignored, important policy variables such as the optimal regional carbon tax and adaptation could be seriously biased. We also find the regional carbon tax is significantly smaller in the feedback Nash equilibrium than in the social planner's problem in each region, and the North has higher carbon taxes than the Tropic-South.

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Item type	Home library	Collection	Call number	Status	Date due	Barcode	Item holds
Working Paper	Biblioteca Digital	Colección NBER	nber w24473 (Browse shelf(Opens below))	Not For Loan

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March 2018.

We build a novel stochastic dynamic regional integrated assessment model (IAM) of the climate and economic system including a number of important climate science elements that are missing in most IAMs. These elements are spatial heat transport from the Equator to the Poles, sea level rise, permafrost thaw and tipping points. We study optimal policies under cooperation and noncooperation between two regions (the North and the Tropic-South) in the face of risks and recursive utility. We introduce a new general computational algorithm to find feedback Nash equilibrium. Our results suggest that when the elements of climate science are ignored, important policy variables such as the optimal regional carbon tax and adaptation could be seriously biased. We also find the regional carbon tax is significantly smaller in the feedback Nash equilibrium than in the social planner's problem in each region, and the North has higher carbon taxes than the Tropic-South.