Working Paper: NBER ID: w24411
Authors: Daron Acemoglu; Will Rafey
Abstract: We show that, in a model without commitment to future policies, geoengineering breakthroughs can have adverse environmental and welfare effects because they change the (equilibrium) carbon taxes. In our model, energy producers emit carbon, which creates a negative environmental externality, and may decide to switch to cleaner technology. A benevolent social planner sets carbon taxes without commitment. Higher future carbon taxes both reduce emissions given technology and encourage energy producers to switch to cleaner technology. Geoengineering advances, which reduce the negative environmental effects of the existing stock of carbon, decrease future carbon taxes and thus discourage private investments in conventional clean technology. We characterize the conditions under which these advances diminish - rather than improve - environmental quality and welfare.
Keywords: geoengineering; carbon taxation; environmental policy
JEL Codes: C65; O30; O31; O33; Q01; Q4; Q54; Q55; Q58
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Geoengineering breakthroughs (Q54) | Future carbon taxes (H23) |
| Future carbon taxes (H23) | Investments in cleaner technologies (Q55) |
| Geoengineering breakthroughs (Q54) | Investments in cleaner technologies (Q55) |
| Geoengineering breakthroughs (Q54) | Environmental outcomes (Q56) |
| Future carbon taxes (H23) | Environmental outcomes (Q56) |
| Investments in cleaner technologies (Q55) | Environmental outcomes (Q56) |