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  Optimal climate policy under tipping risk and temporal risk aversion

Fillon, R., Guivarch, C., Taconet, N. (2023): Optimal climate policy under tipping risk and temporal risk aversion. - Journal of Environmental Economics and Management, 121, 102850.
https://doi.org/10.1016/j.jeem.2023.102850

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 Creators:
Fillon, Romain1, Author
Guivarch, Céline1, Author
Taconet, Nicolas2, Author              
Affiliations:
1External Organizations, ou_persistent22              
2Potsdam Institute for Climate Impact Research, Potsdam, ou_persistent13              

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 Abstract: We investigate the implications of absolute risk aversion with respect to intertemporal utility, i.e. temporal risk aversion, in the presence of a stylized climate tipping risk affecting productivity irreversibly. Optimal climate policy is more stringent under temporal risk aversion, in order to reduce all present and future probabilities of crossing the tipping point and avoid a situation where all generations are badly off. Temporal risk aversion implies a 30% increase in the social cost of carbon (SCC) under our benchmark calibration and for a 10% irreversible increase in the level of economic damage from climate change. The optimal SCC under temporal risk aversion increases sharply with the level of damage brought by a potential tipping point.

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Language(s): eng - English
 Dates: 2022-10-212023-07-122023-08-02
 Publication Status: Finally published
 Pages: -
 Publishing info: -
 Table of Contents: -
 Rev. Type: Peer
 Identifiers: DOI: 10.1016/j.jeem.2023.102850
MDB-ID: No data to archive
Organisational keyword: RD3 - Transformation Pathways
PIKDOMAIN: RD3 - Transformation Pathways
Working Group: Macroeconomic modeling of climate change mitigation and impacts
Model / method: Quantitative Methods
Regional keyword: Global
Research topic keyword: Climate Policy
Research topic keyword: Climate impacts
 Degree: -

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Project name : PRISMA
Grant ID : 101081604
Funding program : Horizon Europe (HE)
Funding organization : European Commission (EC)

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Title: Journal of Environmental Economics and Management
Source Genre: Journal, SCI, Scopus
 Creator(s):
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Publ. Info: -
Pages: - Volume / Issue: 121 Sequence Number: 102850 Start / End Page: - Identifier: CoNE: https://publications.pik-potsdam.de/cone/journals/resource/journal-of-environmental-economics-and-management
Publisher: Elsevier