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Optimal climate policy and the future of world economic development

Research, Environment1 min read

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

Published in: The World Bank Economic Review

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Abstract:

How much should 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.

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r.i.c.e. is a nonprofit research organization, dedicated to understanding the lives of poor people, especially young children, in India, and to promoting their well-being.

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