Weighing cows and coal: Optimal taxes for methane and carbon from a tipping risk

Vol: 
65/2019
Author name: 
Wiskich A
Year: 
2019
Month: 
September
Abstract: 

Different optimal tax paths for short-lived methane and long-lived carbon arise in a cost-benefit framework with an unknown temperature threshold where severe and irreversible climate impacts, called a tipping point, occurs. Tax paths are compared with a cost minimising approach where an upper-temperature limit is set. In both approaches, the weight (ratio) of methane to carbon taxes converge to the same value by the end of the peak temperature stabilisation period. Numerical results from the cost-benefit framework suggest: the optimal weight is close to the current United Nations policy of a 100-year Global Warming Potential; and the time-frame should decrease to align with the expected end of peak temperature.

Publication file: 

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