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All Inclusive Climate Policy in a Growing Economy: The Role of Human Health

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  • Lucas Bretschger

    (Center of Economic Research, ETH Zurich, Zurichbergstrasse 18, 8092 Zurich, Switzerland)

  • Evgenij Komarov

    (Center of Economic Research, ETH Zurich, Zurichbergstrasse 18, 8092 Zurich, Switzerland)

Abstract

We determine optimal climate policy using a dynamic climate model that accounts for the damages to capital and human health from burning fossil fuels. Our theoretical macroeconomic approach incorporates a separate health sector into an integrated climate-economy framework and provides closed-form analytical solutions for the main model variables. Economic growth is endogenously driven by innovation, with labor availability and productivity, and thus human health, being critical. Calibrating the model, we find that 44% of total resource stock should be extracted when considering damages to capital, but only 1% when health damages are included. The health perspective requires optimal environmental policies that are much more stringent than those normally advocated in climate economics, since harm to human health has negative effects on economic growth. Socially optimal growth exceeds the rate under free market conditions.

Suggested Citation

  • Lucas Bretschger & Evgenij Komarov, 2023. "All Inclusive Climate Policy in a Growing Economy: The Role of Human Health," CER-ETH Economics working paper series 23/384, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich.
    • Handle: RePEc:eth:wpswif:23-384
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    More about this item

    Keywords

    Optimal climate policy; human health; climate damages; optimum resource stock;
    All these keywords.

    JEL classification:

    • I15 - Health, Education, and Welfare - - Health - - - Health and Economic Development
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming
    • Q32 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Exhaustible Resources and Economic Development

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