Carbon Taxes and Climate Commitment with Non-constant Time Preference

• 成果类型: Article
• 署名作者: Iverson, Terrence; Karp, Larry
• 署名单位: Colorado State University System; Colorado State University Fort Collins; University of California System; University of California Berkeley
• 刊物名称: REVIEW OF ECONOMIC STUDIES
• ISSN/ISSBN: 0034-6527
• DOI: 10.1093/restud/rdaa048
• 发表日期: 2021
• 页码: 764-799
• 关键词: growth; PARTICIPATION; inconsistency; uncertainty; insurance; welfare; matters; POLICY; MODEL; RISK

摘要

We study the Markov perfect equilibrium in a dynamic game where agents have non-constant time preference, decentralized households determine aggregate savings, and a planner chooses climate policy. The article is the first to solve this problem with general discounting and general functional forms. With time-inconsistent preferences, a commitment device that allows a planner to choose climate policy for multiple periods is potentially very valuable. Nevertheless, our quantitative results show that while a permanent commitment device would be very valuable, the ability to commit policy for only 100 years adds less than 2% to the value of climate policy without commitment. We solve a log-linear version of the model analytically, generating a formula for the optimal carbon tax that includes the formula in (2014, Econometrica, 82, 41-88) as a special case. More importantly, we develop new algorithms to solve the general game numerically. Convex damages lead to strategic interactions across generations of planners that lower the optimal carbon tax by 45% relative to the scenario without strategic interactions.