22.11.2023 Climate Economics#

Climate Change = prime example for Externality

Solution: => internalize the externaltiy

Carbon Taxes#

government induced tax on emissions

  • implemented in Germany, Sweden, Norway …

  • often not sufficient

  • distributional effects (Gelbwesten) => Climate Bonus (Klimageld)

Cap and Trade#

  • Cap = upper limit on emissions

  • Trade = trading of bought certificates

=> efficient production

  • often price not high enough

  • high variance in prices => investment not secure

Cost-Benefit Analysis#

Social Cost of Carbon: economic damage done by CO2t emission

dependent on:

  • damage function

  • discount rates

Discount Rates

\[ i = z + n \times g \]

  • z = time preference (UBA = 0)

  • n = percent change utility for 1% increase consumption

  • g = growth consumption