Abstract
In the past several years economists have developed a body of research concerning optimal economic policy in response to the possibility of global warming due to greenhouse gas (GHG) emissions (contributors include Nordhaus [9; 10; 11; 12], Poterba [14], Manne and Richels [8], Cline [1], Jorgenson, Slesnick, and Wilcoxen [6], Goulder [3; 4], Gaskins and Weyant [2]). In this paper, we attempt to assist policy-makers who face the practical problem of estimating the magnitude of the socially optimal initial greenhouse gas tax and the corresponding magnitude of emission control. To do this, we adapt the optimal growth framework developed by Nordhaus [12] in his DICE model to investigate the initial optimal tax and emissions control, as well as their evolution over a long planning horizon. We perform sensitivity analysis not included in his monograph.
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