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CETA: A Model for Carbon Emissions Trajectory Assessment

We present an economic growth and energy use model incorporating representations of greenhouse gas accumulation, global mean temperature rise, and the damage cost associated with this temperature rise. Under alternative assumptions about the damage cost function, we find optimal time paths of CO, emissions control and associated optimal carbon taxes. Our work indicates that with plausible assumptions, an optimal carbon tax will rise over time, in contrast to the "hump shaped" carbon taxes implied by C02 reduction policies currently being discussed. Our work also suggests that the damage cost function would have to be both high and nonlinear in order to justify the general level of CO2 control and carbon taxes implied by these policies.

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Energy Specializations: Energy Modeling – Other; Energy and the Environment – Climate Change and Greenhouse Gases

JEL Codes:
C59 - Econometric Modeling: Other
Q54 - Climate; Natural Disasters and Their Management; Global Warming

Keywords: CO2 emissions, CETA model, Climate policy

DOI: 10.5547/ISSN0195-6574-EJ-Vol13-No1-4

Published in Volume 13, Number 1 of The Quarterly Journal of the IAEE's Energy Economics Education Foundation.