Working Paper: NBER ID: w27880
Authors: Derek Lemoine
Abstract: I analyze a novel climate policy instrument that attaches a transferable asset to each unit of carbon in the atmosphere. I show that this instrument improves on an emission tax by incentivizing both optimal emission reductions and optimal removal of past emissions. Emitters post a bond equal to the worst-case social cost of carbon, and the regulator deducts damages as they are realized over time. Quantitatively, a bond that is double the optimal emission tax is sufficient to provide optimal carbon removal incentives in 95% of cases.
Keywords: No keywords provided
JEL Codes: G12; H23; Q54; Q58
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| bond amount (set at the worst-case social cost of carbon) (H43) | optimal emission reductions (Q52) |
| bond amount (set at the worst-case social cost of carbon) (H43) | carbon removal (Q54) |
| carbon share policy (Q58) | optimal emission reductions (Q52) |
| carbon share policy (Q58) | carbon removal (Q54) |
| optimal emission reductions (Q52) | carbon removal (Q54) |