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An Overlapping Generations Model of Climate‐Economy Interactions

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  • Richard B. Howarth

Abstract

A numerically calibrated overlapping generations model of climate change and the world econommy is examined in this paper. In the absence of intergenerational transfers, efficient rates of greenhouse gas emissions abatement rise from 16% in the present to 25% in the long run, while mean global temperature increases by 7.4°C relative to the preindustrial norm. A utilitarian optimum, which attaches equal weight to each generation's life‐cycle utility, yields abatement rates that rise from 48% to 89%, with a long‐run temperature increase of 3.4°C. A second‐best utilitarian path, in which intergenerational transfers are by assumption institutionally infeasible, also supports stringent abatement measures.

Suggested Citation

  • Richard B. Howarth, 1998. "An Overlapping Generations Model of Climate‐Economy Interactions," Scandinavian Journal of Economics, Wiley Blackwell, vol. 100(3), pages 575-591, September.
    • Handle: RePEc:bla:scandj:v:100:y:1998:i:3:p:575-591
    DOI: 10.1111/1467-9442.00123
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    Cited by:

    1. Laurence Kotlikoff & Felix Kubler & Andrey Polbin & Jeffrey Sachs & Simon Scheidegger, 2021. "Making Carbon Taxation A Generational Win Win," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 62(1), pages 3-46, February.
    2. Suzanne Kok, 2013. "Town and city jobs: Your job is different in another location," CPB Discussion Paper 246.rdf, CPB Netherlands Bureau for Economic Policy Analysis.
    3. Reyer Gerlagh & Richard Jaimes & Ali Motavasseli, 2017. "Global Demographic Change and Climate Policies," CESifo Working Paper Series 6617, CESifo.
    4. María‐José Gutiérrez, 2008. "Dynamic Inefficiency in an Overlapping Generation Economy with Pollution and Health Costs," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 10(4), pages 563-594, August.
    5. Voyvoda, Ebru, 2013. "Energy-Economy-Environment Interaction Using OLG Framework: Evaluation of Alternative Policies under Demographic Transition," Conference papers 332376, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    6. Kotlikoff, Laurence & Kubler, Felix & Polbin, Andrey & Scheidegger, Simon, 2024. "Can today’s and tomorrow’s world uniformly gain from carbon taxation?," European Economic Review, Elsevier, vol. 168(C).
    7. Escapa García, Marta & Ansuategui Cobo, José Alberto & Pérez, Azucena, 2003. "International and Intergenerational Dimensions of Climate Change: North-South Cooperation in an Overlapping Generations Framework," IKERLANAK 2003-06, Universidad del País Vasco - Departamento de Fundamentos del Análisis Económico I.
    8. Celso Brunetti & Matteo Crosignani & Benjamin Dennis & Gurubala Kotta & Donald P. Morgan & Chaehee Shin & Ilknur Zer, 2024. "Climate-Related Financial Stability Risks for the United States: Methods and Applications," Economic Policy Review, Federal Reserve Bank of New York, vol. 30(1), pages 1-37, October.
    9. Larry Karp & Armon Rezai, 2014. "The Political Economy Of Environmental Policy With Overlapping Generations," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 55(3), pages 711-733, August.
    10. Drupp, Moritz A. & Baumgärtner, Stefan & Meyer, Moritz & Quaas, Martin F. & von Wehrden, Henrik, 2020. "Between Ostrom and Nordhaus: The research landscape of sustainability economics," Ecological Economics, Elsevier, vol. 172(C).
    11. Lint Barrage, 2019. "The Nobel Memorial Prize for William D. Nordhaus," Scandinavian Journal of Economics, Wiley Blackwell, vol. 121(3), pages 884-924, July.
    12. Richard S. J. Tol, 2021. "Estimates of the social cost of carbon have increased over time," Papers 2105.03656, arXiv.org, revised Aug 2022.
    13. Gutiérrez Huerta, María José, 2002. "Dynamic Inefficiency in an Overlapping Generation Economy with Pollution and Health Costs," DFAEII Working Papers 1988-088X, University of the Basque Country - Department of Foundations of Economic Analysis II.
    14. Richard S.J. Tol, 2021. "Estimates of the social cost of carbon have not changed over time," Working Paper Series 0821, Department of Economics, University of Sussex Business School.

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