Global warming and economic externalities. (English) Zbl 1277.91135
Summary: Despite worldwide policy efforts such as the Kyoto Protocol, the emission of greenhouse gases (GHG) remains a negative externality. Economic equilibrium paths in the presence of such an uncorrected externality are inefficient; as a consequence, there is no real economic opportunity cost to correcting this externality by mitigating global warming. Mitigation investment using resources diverted from conventional investments can raise the economic well-being of both current and future generations. The economic literature on GHG emissions misleadingly focuses attention on the intergenerational equity aspects of mitigation by using a hybrid constrained optimal path as the “business-as-usual” benchmark. We calibrate a simple Keynes-Ramsey growth model to illustrate the significant potential Pareto improvement from mitigation investment and to explain the equilibrium concept appropriate to modeling an uncorrected negative externality.
MSC:
| 91B62 | Economic growth models |
| 91B76 | Environmental economics (natural resource models, harvesting, pollution, etc.) |
References:
| [1] | Arrow, K.: Global Climate Change: A Challenge to Policy. Economists’ Voice (June), 1–5 (2007) |
| [2] | Asheim, G., Mitra, T., Tungodden, B.: Sustainable recursive social welfare function, Econ Theory (this issue) (2011) · Zbl 1277.91051 |
| [3] | Barker, T.: The economics of dangerous climate change. Clim. Change 173–194 (2008) |
| [4] | Burniaux, J.-M., Oliveira Martins, J.: Carbon leakages: a general equilibrium view, Econ Theory (this issue) (2011) · Zbl 1276.91081 |
| [5] | Chichilnisky G.: North-South trade and the global environment. Am Econ Rev 84, 851–874 (1994) |
| [6] | Chichilnisky, G.: Sustainable markets with short sales, Econ Theory (this issue) (2011) · Zbl 1277.91120 |
| [7] | Chichilnisky, G., Eisenberger, P.: Asteroids: assesing catastrophic risks. J Probab Stat 2010 Article ID 954750, 15 p (2010) |
| [8] | Chichilnisky G., Heal G.: Who should abate carbon emission? An international perspective. Econ Let 44, 443–449 (1994) · Zbl 0799.90035 · doi:10.1016/0165-1765(94)90119-8 |
| [9] | Chichilnisky G., Sheeran K.: Saving Kyoto. New Holland, UK (2009) |
| [10] | Chipman, J.S., Tian, G.: Detrimental externalities, pollution rights, and the ”Coarse Theorem”. Econ Theory (this issue) (2011) · Zbl 1276.91082 |
| [11] | Dutta, P.K., Radner, R.: Capital growth in a global warming model will China and India sign a climate treaty? Econ Theory (this issue) (2011) · Zbl 1276.91083 |
| [12] | Figuieres, C., Tidball, M.: Sustainable exploitation of a natural resource: a satisfying use of chichilnisky’s criterion, Econ Theory (this issue) (2011) |
| [13] | Foley D.K.: The economic fundamentals of global warming. In: Harris, J.M., Goodwin, N.R. (eds) Twenty-First Century Macroeconomics: Responding to the Climate Challenge, chap. 5., Edward Elgar Publishing, Cheltenham and Northampton (2009) |
| [14] | IPCC.: Climate Change 2007, the Fourth IPCC Assessment Report. http://www.ipcc.ch/ipccreports/ar4-syr.htm (2007). Accessed 10 August 2008 |
| [15] | Karp, L., Zhang, J.: Taxes versus quantities for a stock pollutant with endogenous abatement costs and asymmetric information. Econ Theory (this issue) (2011) · Zbl 1276.91084 |
| [16] | Lauwers, L.: Intergenerational equity, efficiency and constructibility, Econ Theory (this issue) (2011) · Zbl 1276.91089 |
| [17] | Lecocq, F., Hourcade, J.-C.: Unspoken ethical issues in the climate affair insights from a theoretical analysis of negotiation mandates. Econ Theory (this issue) (2011) · Zbl 1277.91144 |
| [18] | Nordhaus W.D.: A Question of Balance: Weighing the Options on Global Warming Policies. Yale University Press, New Haven (2008) |
| [19] | Nordhaus W.D., Boyer J.: Warming the World. MIT Press, Cambridge (2000) |
| [20] | Ostrom, E.: Nested externalities and polycentric institutions: must we wait for global solutions to climate change before taking actions at other scales? Econ Theory (this issue) (2011) · Zbl 1276.91086 |
| [21] | Rezai A.: Recast the DICE and its policy implications. Macroecon Dyn 14, 275–289 (2010) · doi:10.1017/S1365100510000428 |
| [22] | Samuelson P.A.: A catenary turnpike theorem involving consumption and the golden rule. Am Econ Rev 55, 486–496 (1965) |
| [23] | Shiell M.L., Lyssenko N.: Computing business-as-usual with a representative agent and a pollution externality. J Econ Dyn Control 32, 1543–1568 (2008) · Zbl 1181.91158 · doi:10.1016/j.jedc.2007.06.010 |
| [24] | Stern N.: The Economics of Climate Change: The Stern Review. Cambridge University Press, Cambridge (2007) |
| [25] | Tol R.: The economic effects of climate change. J Econ Prespective 23, 29–51 (2009) · doi:10.1257/jep.23.2.29 |
This reference list is based on information provided by the publisher or from digital mathematics libraries. Its items are heuristically matched to zbMATH identifiers and may contain data conversion errors. In some cases that data have been complemented/enhanced by data from zbMATH Open. This attempts to reflect the references listed in the original paper as accurately as possible without claiming completeness or a perfect matching.
