Climate policies with non-constant discounting
نویسندگان
چکیده
We consider the climate-policy implications of non-constant time preferences when there is no commitment to future policies. The conceptual and quantitative results follow from the observation that, with time-declining discounting, the unusual delays and persistence of climate impacts provide a commitment device for climate policy-makers, overturning a fundamental climate-policy conclusion from the previous literature that the returns on climate investments should equal the return on capital savings in the economy. We assess the quantitative implications by restricting attention to a parametric class for preferences and technology, and by solving for a time-consistent Markov equilibrium explicitly. (JEL classification: H43; H41; D61; D91; Q54; E21.
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