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Project Citation: 

Lemoine, Derek, and Rudik, Ivan. Replication data for: Steering the Climate System: Using Inertia to Lower the Cost of Policy. Nashville, TN: American Economic Association [publisher], 2017. Ann Arbor, MI: Inter-university Consortium for Political and Social Research [distributor], 2019-10-12.

Project Description

Summary:  View help for Summary Common views hold that the efficient way to limit warming to a chosen level is to price carbon emissions at a rate that increases exponentially. We show that this Hotelling tax on carbon emissions is actually inefficient. The least-cost policy path takes advantage of the climate system's inertia to delay reducing emissions and allow greater cumulative emissions. The efficient carbon tax follows an inverse-U-shaped path and grows more slowly than the Hotelling tax. Economic models that assume exponentially increasing carbon taxes are overestimating the cost of limiting warming, overestimating the efficient near-term carbon tax, and overvaluing technologies that mature sooner.

Scope of Project

JEL Classification:  View help for JEL Classification
      H23 Taxation and Subsidies: Externalities; Redistributive Effects; Environmental Taxes and Subsidies
      Q54 Climate; Natural Disasters and Their Management; Global Warming
      Q58 Environmental Economics: Government Policy

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