Working Paper: CEPR ID: DP17703
Authors: Martin Hnsel; Michael Bauer; Moritz Drupp; Gernot Wagner; Glenn Rudebusch
Abstract: The extent of future climate change is a policy choice. Using an integrated climate-economy assessment model, we estimate climate policy curves (CPCs) that link the price of carbon dioxide (CO2) to subsequent global temperatures. The resulting downward sloping CPCs quantify the inverse relationship between carbon prices and future temperatures and illustrate how climate policy choices determine climate outcomes. Our analysis can account for a variety of climate policies—for example, carbon or fuel taxes, emissions trading programs, green subsidies, and energy-efficiency regulations—all of which can be summarized by means of an effective CO2 price. Importantly, we also examine CPC uncertainty, for example, by perturbing the model’s equilibrium climate sensitivity to trace out the temperature range associated with a given CO2 price. Finally, based on the latest Intergovernmental Panel on Climate Change (IPCC) integrated-assessment model scenarios, we estimate an implicit CPC, which provides a high-level IPCC summary of the climate policy actions required to achieve global climate targets
Keywords: Climate Policy; Carbon Pricing; Global Warming; Integrated Assessment Models
JEL Codes: Q54; Q58
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| higher ECS (P49) | higher temperature increases for a given carbon price (Q54) |
| CO2 prices (P22) | emissions (Q52) |
| emissions (Q52) | climate outcomes (Q54) |
| higher carbon prices (Q31) | lower future global temperatures (Q54) |