Open access
Date
2023-05Type
- Working Paper
ETH Bibliography
yes
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Abstract
We determine optimal climate policy using a dynamic climate model that accounts for the damages to capital and human health from burning fossil fuels. Our theoretical macroeconomic approach incorporates a separate health sector into an integrated climate-economy framework and provides closed-form analytical solutions for the main model variables. Economic growth is endogenously driven by innovation, with labor availability and productivity, and thus human health, being critical. Calibrating the model, we find that 44% of total resource stock should be extracted when considering damages to capital, but only 1% when health damages are included. The health perspective requires optimal environmental policies that are much more stringent than those normally advocated in climate economics, since harm to human health has negative effects on economic growth. Socially optimal growth exceeds the rate under free market conditions. Show more
Permanent link
https://doi.org/10.3929/ethz-b-000614431Publication status
publishedJournal / series
Economics Working Paper SeriesVolume
Publisher
ETH Zurich, Center of Economic Research (CER-ETH)Subject
Optimal climate policy; Human health; Climate damages; optimum resource stockOrganisational unit
03635 - Bretschger, Lucas (emeritus) / Bretschger, Lucas (emeritus)
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ETH Bibliography
yes
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