IDEAS home Printed from https://ideas.repec.org/p/fem/femwpa/2012.74.html
   My bibliography  Save this paper

Spatial Climate-Economic Models in the Design of Optimal Climate Policies Across Locations

Author

Listed:
  • William A. Brock

    (Department of Economics, University of Wisconsin)

  • Gustav Engström

    (The Beijer Institute of Ecological Economics and University of Stockholm)

  • Anastasios Xepapadeas

    (Athens University of Economics and Business)

Abstract

We couple a one-dimensional energy balance climate model with heat transportation across latitudes, with an economic growth model. We derive temperature and damage distributions across locations and optimal taxes on fossil fuels which, in contrast to zero-dimensional Integrated Assessment Models, account for cross latitude externalities. We analyse the impact of welfare weights on the spatial structure of optimal carbon taxes and identify conditions under which these taxes are spatially nonhomogeneous and are lower in latitudes with relatively lower per capita income populations. We show the way that heat transportation affects local economic variables and taxes, and locate sufficient conditions for optimal mitigation policies to have rapid ramp-up initially and then decrease over time.

Suggested Citation

  • William A. Brock & Gustav Engström & Anastasios Xepapadeas, 2012. "Spatial Climate-Economic Models in the Design of Optimal Climate Policies Across Locations," Working Papers 2012.74, Fondazione Eni Enrico Mattei.
    • Handle: RePEc:fem:femwpa:2012.74
    as

    Download full text from publisher

    File URL: https://feem-media.s3.eu-central-1.amazonaws.com/wp-content/uploads/NDL2012-074.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Chichilnisky, Graciela & Heal, Geoffrey, 1994. "Who should abate carbon emissions? : An international viewpoint," Economics Letters, Elsevier, vol. 44(4), pages 443-449, April.
    2. William Brock & Gustav Engstrom & Anastasios Xepapadeas, 2012. "Energy Balance Climate Models, Damage Reservoirs and the Time Profile of Climate Change Policy," Working Papers 2012.20, Fondazione Eni Enrico Mattei.
    3. Desmet, Klaus & Rossi-Hansberg, Esteban, 2015. "On the spatial economic impact of global warming," Journal of Urban Economics, Elsevier, vol. 88(C), pages 16-37.
    4. Leonard Druyan (ed.), 2012. "Climate Models," Books, IntechOpen, number 1838, January-J.
    5. Martin L. Weitzman, 2009. "On Modeling and Interpreting the Economics of Catastrophic Climate Change," The Review of Economics and Statistics, MIT Press, vol. 91(1), pages 1-19, February.
    6. Keen, Michael & Kotsogiannis, Christos, 2014. "Coordinating climate and trade policies: Pareto efficiency and the role of border tax adjustments," Journal of International Economics, Elsevier, vol. 94(1), pages 119-128.
    7. John Hassler & Per Krusell, 2012. "Economics And Climate Change: Integrated Assessment In A Multi-Region World," Journal of the European Economic Association, European Economic Association, vol. 10(5), pages 974-1000, October.
    8. Melissa Dell & Benjamin F. Jones & Benjamin A. Olken, 2012. "Temperature Shocks and Economic Growth: Evidence from the Last Half Century," American Economic Journal: Macroeconomics, American Economic Association, vol. 4(3), pages 66-95, July.
    9. Mikhail Golosov & John Hassler & Per Krusell & Aleh Tsyvinski, 2014. "Optimal Taxes on Fossil Fuel in General Equilibrium," Econometrica, Econometric Society, vol. 82(1), pages 41-88, January.
    10. -, 2009. "The economics of climate change," Sede Subregional de la CEPAL para el Caribe (Estudios e Investigaciones) 38679, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL).
    11. Kenneth L. Judd, 1998. "Numerical Methods in Economics," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262100711, April.
    12. Joshua Elliott & Ian Foster & Samuel Kortum & Todd Munson & Fernando Pérez Cervantes & David Weisbach, 2010. "Trade and Carbon Taxes," American Economic Review, American Economic Association, vol. 100(2), pages 465-469, May.
    13. Sir Nicholas Stern, 2006. "What is the Economics of Climate Change?," World Economics, World Economics, 1 Ivory Square, Plantation Wharf, London, United Kingdom, SW11 3UE, vol. 7(2), pages 1-10, April.
    14. William Brock & Gustav Engstrom & Anastasios Xepapadeas, 2012. "Energy Balance Climate Models, Damage Reservoirs and the Time Pro�le of Climate Change Policy," DEOS Working Papers 1204, Athens University of Economics and Business.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Dumas, Marion & Rising, James & Urpelainen, Johannes, 2016. "Political competition and renewable energy transitions over long time horizons: A dynamic approach," Ecological Economics, Elsevier, vol. 124(C), pages 175-184.
    2. Manousi, Vasiliki & Anastasios, Xepapadeas, 2013. "Mitigation and Solar Radiation Management in Climate Change Policies," Economy and Society 150372, Fondazione Eni Enrico Mattei (FEEM).
    3. William Brock & Anastasios Xepapadeas, 2015. "Spatial Heat Transport, Polar Amplification and Climate Change Policy," DEOS Working Papers 1515, Athens University of Economics and Business.
    4. Brock, W. & Xepapadeas, A., 2017. "Climate change policy under polar amplification," European Economic Review, Elsevier, vol. 99(C), pages 93-112.
    5. William Brock & Anastasios Xepapadeas, 2020. "Climate change policy under spatial heat transport and polar amplification," Chapters, in: Graciela Chichilnisky & Armon Rezai (ed.), Handbook on the Economics of Climate Change, chapter 7, pages 127-166, Edward Elgar Publishing.
    6. Brock, William & Xepapadeas, Anastasios, 2021. "Regional climate policy under deep uncertainty: robust control and distributional concerns," Environment and Development Economics, Cambridge University Press, vol. 26(3), pages 211-238, June.
    7. William Brock & Anastasios Xepapadeas, 2020. "Spatial Environmental and Resource Economics," DEOS Working Papers 2002, Athens University of Economics and Business.
    8. Karp, Larry & Traeger, Christian, 2024. "Taxes versus quantities reassessed," Journal of Environmental Economics and Management, Elsevier, vol. 125(C).
    9. Dieter Grass, 2015. "From 0D to 1D spatial models using OCMat," Papers 1505.03956, arXiv.org.
    10. Vassiliki Manoussi & Anastasios Xepapadeas, 2014. "Cooperation and Competition in Climate Change Policies: Mitigation and Climate Engineering when Countries are Asymmetric," DEOS Working Papers 1408, Athens University of Economics and Business.
    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. Anastasios Xepapadeas & Athanasios Yannacopoulos, 2018. "Spatially Structured Deep Uncertainty, Robust Control, and Climate Change Policies," DEOS Working Papers 1807, Athens University of Economics and Business.
    13. Anastasios Xepapadeas, 2022. "On the optimal management of environmental stock externalities," Proceedings of the National Academy of Sciences, Proceedings of the National Academy of Sciences, vol. 119(24), pages 2202679119-, June.
    14. Hassler, J. & Krusell, P. & Smith, A.A., 2016. "Environmental Macroeconomics," Handbook of Macroeconomics, in: J. B. Taylor & Harald Uhlig (ed.), Handbook of Macroeconomics, edition 1, volume 2, chapter 0, pages 1893-2008, Elsevier.
    15. Engström, Gustav, 2016. "Structural and climatic change," Structural Change and Economic Dynamics, Elsevier, vol. 37(C), pages 62-74.
    16. Jonathan I. Dingel & Kyle C. Meng & Solomon M. Hsiang, 2019. "Spatial Correlation, Trade, and Inequality: Evidence from the Global Climate," NBER Working Papers 25447, National Bureau of Economic Research, Inc.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Hassler, J. & Krusell, P. & Smith, A.A., 2016. "Environmental Macroeconomics," Handbook of Macroeconomics, in: J. B. Taylor & Harald Uhlig (ed.), Handbook of Macroeconomics, edition 1, volume 2, chapter 0, pages 1893-2008, Elsevier.
    2. Desmet, Klaus & Rossi-Hansberg, Esteban, 2015. "On the spatial economic impact of global warming," Journal of Urban Economics, Elsevier, vol. 88(C), pages 16-37.
    3. Hjort, Ingrid, 2016. "Potential Climate Risks in Financial Markets: A Literature Overview," Memorandum 01/2016, Oslo University, Department of Economics.
    4. David Comerford, 2013. "A balance of questions: what can we ask of climate change economics?," Edinburgh School of Economics Discussion Paper Series 216, Edinburgh School of Economics, University of Edinburgh.
    5. Lamperti, Francesco & Bosetti, Valentina & Roventini, Andrea & Tavoni, Massimo & Treibich, Tania, 2021. "Three green financial policies to address climate risks," Journal of Financial Stability, Elsevier, vol. 54(C).
    6. Melissa Dell & Benjamin F. Jones & Benjamin A. Olken, 2014. "What Do We Learn from the Weather? The New Climate-Economy Literature," Journal of Economic Literature, American Economic Association, vol. 52(3), pages 740-798, September.
    7. W. A. Brock & A. Xepapadeas, 2015. "Modeling Coupled Climate, Ecosystems, and Economic Systems," Working Papers 2015.66, Fondazione Eni Enrico Mattei.
    8. Kornek, Ulrike & Klenert, David & Edenhofer, Ottmar & Fleurbaey, Marc, 2021. "The social cost of carbon and inequality: When local redistribution shapes global carbon prices," Journal of Environmental Economics and Management, Elsevier, vol. 107(C).
    9. Tol, Richard S.J., 2024. "A meta-analysis of the total economic impact of climate change," Energy Policy, Elsevier, vol. 185(C).
    10. Frederick Ploeg & Aart Zeeuw, 2016. "Non-cooperative and Cooperative Responses to Climate Catastrophes in the Global Economy: A North–South Perspective," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 65(3), pages 519-540, November.
    11. Hiroaki Sakamoto & Masako Ikefuji & Jan R. Magnus, 2020. "Adaptation for Mitigation," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 75(3), pages 457-484, March.
    12. Lamperti, F. & Dosi, G. & Napoletano, M. & Roventini, A. & Sapio, A., 2018. "Faraway, So Close: Coupled Climate and Economic Dynamics in an Agent-based Integrated Assessment Model," Ecological Economics, Elsevier, vol. 150(C), pages 315-339.
    13. Rising, James A. & Taylor, Charlotte & Ives, Matthew C. & Ward, Robert E.t., 2022. "Challenges and innovations in the economic evaluation of the risks of climate change," LSE Research Online Documents on Economics 114941, London School of Economics and Political Science, LSE Library.
    14. Kent D. Daniel & Robert B. Litterman & Gernot Wagner, 2016. "Applying Asset Pricing Theory to Calibrate the Price of Climate Risk," NBER Working Papers 22795, National Bureau of Economic Research, Inc.
    15. Rising, James A. & Taylor, Charlotte & Ives, Matthew C. & Ward, Robert E.T., 2022. "Challenges and innovations in the economic evaluation of the risks of climate change," Ecological Economics, Elsevier, vol. 197(C).
    16. Ton S. van den Bremer & Frederick van der Ploeg, 2021. "The Risk-Adjusted Carbon Price," American Economic Review, American Economic Association, vol. 111(9), pages 2782-2810, September.
    17. Yongyang Cai & Thomas S. Lontzek, 2019. "The Social Cost of Carbon with Economic and Climate Risks," Journal of Political Economy, University of Chicago Press, vol. 127(6), pages 2684-2734.
    18. Brock, William A. & Engström, Gustav & Grass, Dieter & Xepapadeas, Anastasios, 2013. "Energy balance climate models and general equilibrium optimal mitigation policies," Journal of Economic Dynamics and Control, Elsevier, vol. 37(12), pages 2371-2396.
    19. Drudi, Francesco & Moench, Emanuel & Holthausen, Cornelia & Weber, Pierre-François & Ferrucci, Gianluigi & Setzer, Ralph & Adao, Bernardino & Dées, Stéphane & Alogoskoufis, Spyros & Téllez, Mar Delgad, 2021. "Climate change and monetary policy in the euro area," Occasional Paper Series 271, European Central Bank.
    20. Stern, Nicholas, 2021. "A time for action on climate change and a time for change in economics," LSE Research Online Documents on Economics 112802, London School of Economics and Political Science, LSE Library.

    More about this item

    Keywords

    One-dimensional Energy Balance Model; Heat Transport; Latitudes; Temperature Distribution; Damage Distribution; Social Planner; Competitive Equilibrium; Local Welfare Weights; Optimal Taxes;
    All these keywords.

    JEL classification:

    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy
    • R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:fem:femwpa:2012.74. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Alberto Prina Cerai (email available below). General contact details of provider: https://edirc.repec.org/data/feemmit.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.