Despite worldwide policy efforts such as the Kyoto Protocol, the emission of greenhouse gases (GHG) remains a negative externality. Economic equilibrium paths in the presence of such an uncorrected externality are inefficient; as a consequence there is no real economic opportunity cost to correcting this externality by mitigating global warming. Mitigation investment using resources diverted from conventional investments can raise the economic well-being of both current and future generations. The economic literature on GHG emissions misleadingly focuses attention on the intergenerational equity aspects of mitigation by using a hybrid constrained optimal path as the "business-as-usual" benchmark. We calibrate a simple Keynes-Ramsey growth model to illustrate the significant potential Pareto-improvement from mitigation investment, and to explain the equilibrium concept appropriate to modeling an uncorrected negative externality.
| Identifer | oai:union.ndltd.org:VIENNA/oai:epub.wu-wien.ac.at:3037 |
| Date | 02 1900 |
| Creators | Rezai, Armon, Foley, Duncan K., Taylor, Lance |
| Publisher | Springer Verlag |
| Source Sets | Wirtschaftsuniversität Wien |
| Language | English |
| Detected Language | English |
| Type | Article, NonPeerReviewed |
| Format | application/pdf |
| Relation | http://dx.doi.org/10.1007/s00199-010-0592-4, http://www.springerlink.com/, http://epub.wu.ac.at/3037/ |
Page generated in 0.0015 seconds