The cost of climate policy depends on the no-policy alternative without which the opportunity cost of climate action cannot be determined. This reference path has to reflect the current failure in the market for carbon emissions: due to a negative externality, private
investment decisions do not consider the climate damage they entail; agents overinvest in conventional capital and underinvest in climate capital. Internalization of climate damage lowers the private return to capital; agents reduce investment in favor of mitigation and consumption. Optimal climate mitigation increases welfare of the present and
the future. Simulation of the inefficient no-policy scenario in DICE-07 confirms that this point numerically. (author's abstract)
| Identifer | oai:union.ndltd.org:VIENNA/oai:epub.wu-wien.ac.at:3481 |
| Date | January 2011 |
| Creators | Rezai, Armon |
| Publisher | Wiley-Blackwell |
| Source Sets | Wirtschaftsuniversität Wien |
| Language | English |
| Detected Language | English |
| Type | Article, NonPeerReviewed |
| Format | application/pdf |
| Relation | http://dx.doi.org/10.1111/j.1467-9442.2011.01681.x, http://epub.wu.ac.at/3481/ |
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