Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/283365 
Year of Publication: 
2023
Series/Report no.: 
Economics Working Paper Series No. 23/384
Publisher: 
ETH Zurich, CER-ETH - Center of Economic Research, Zurich
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.
Subjects: 
Optimal climate policy
human health
climate damages
optimum resource stock
JEL: 
I15
Q54
044
Q32
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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