Social time preference and the optimal carbon price
Author(s)
Guest, Ross
Griffith University Author(s)
Year published
2011
Metadata
Show full item recordAbstract
This article examines the implications of alternative social time preference assumptions for the optimal carbon price by numerical simulations of a simple Ramsey model. Three specifications of social time preferences are compared: a constant social time preference rate (stpr), decreasing social impatience or hyperbolic social preferences and increasing social impatience. The results show nontrivial effects on the optimal carbon price. The policy implication is that value judgements about intergenerational welfare, reflected in stpr, have implications for policies aimed at achieving a target carbon price. These value judgements ...
View more >This article examines the implications of alternative social time preference assumptions for the optimal carbon price by numerical simulations of a simple Ramsey model. Three specifications of social time preferences are compared: a constant social time preference rate (stpr), decreasing social impatience or hyperbolic social preferences and increasing social impatience. The results show nontrivial effects on the optimal carbon price. The policy implication is that value judgements about intergenerational welfare, reflected in stpr, have implications for policies aimed at achieving a target carbon price. These value judgements therefore ought to be made explicit in setting target carbon prices over time.
View less >
View more >This article examines the implications of alternative social time preference assumptions for the optimal carbon price by numerical simulations of a simple Ramsey model. Three specifications of social time preferences are compared: a constant social time preference rate (stpr), decreasing social impatience or hyperbolic social preferences and increasing social impatience. The results show nontrivial effects on the optimal carbon price. The policy implication is that value judgements about intergenerational welfare, reflected in stpr, have implications for policies aimed at achieving a target carbon price. These value judgements therefore ought to be made explicit in setting target carbon prices over time.
View less >
Journal Title
Applied Economics Letters
Volume
18
Issue
12
Subject
Applied economics
Applied economics not elsewhere classified
Banking, finance and investment