Working Paper : 1202


Authors Brock, W., Engstrom, G. and Xepapadeas, A.
Title Energy Balance Climate Models and the Spatial Structure of Optimal Mitigation Policies
Abstract We develop a one-dimemsional energy balance climate model with heat transportation across locations. We introduce the concept of po- tential world GDP at time t, and we introduce, through the temper- ature function, spatial characteristics into the damage function which make damages latitude dependent. We solve the social planner��s prob- lem and characterize the competitive equilibrium. We de��ne optimal taxes on fossil fuels and pro��t taxes on ��rms that extract fossil fuels. Our results suggest that if the implementation of international trans- fers across latitudes is not possible, then optimal taxes are spatially non homogeneous and tend to be lower at the poor latitudes. The degree of spatial di�¤erentiation of optimal taxes depend on heat trans- portation. We also locate su�¢ cient conditions for optimal mitigation policies to have rapid ramp-up initially and then decrease over time. By employing the properties of the spatial model and approximating solutions, we show how to study the impact of thermal transport across latitudes on welfare inequality.
Creation Date 2012-01-22
Keywords Energy Balance Climate Models, Heat Di¤usion, Tem- perature Distribution, Spatial Optimal Taxes
Classification JEL Q54, Q58
File BEX-January_2012.pdf (499692 bytes)
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