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Growth, renewables and the optimal carbon tax

Abstract:

Optimal climate policy is investigated in a Ramsey growth model of the global economy with exhaustible oil reserves, an infinitely elastic supply of renewables, stock-dependent oil extraction costs and convex climate damages. Four regimes can occur. If the initial social cost of oil is less than that of renewables, there are two regimes starting with oil. The first one occurs if the oil stock is not too small and not too large and the initial capital stock is below its steady state in which c...

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Publication status:
Published

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Publisher:
University of Oxford
Series:
OxCarre Papers
Publication date:
2010-12-07
Paper number:
55

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