Title: Towards a fairer distribution of carbon tax across generations in the DICE model through green bonds
Authors: Sergey Orlov - International Institute for Applied Systems Analysis, Austria and Lomonosov Moscow State University (Russia) [presenting]
Elena Rovenskaya - International Institute for Applied Systems Analysis (Austria)
Willi Semmler - New School for Social Research (United States)
Abstract: The introduction of fiscal instruments into DICE model is considered in order to smooth the transition to low-carbon economy and to improve the intergenerational fairness. Namely, we introduce green bonds and taxation for possibility of wealth redistribution in order to pay for the mitigation efforts. The two modeling assumptions are explored: the internal debt and the external debt. While modeling internal debt, we use a portfolio approach for households that allows for them to choose the optimal proportion between bonds and capital investments. We obtain via theoretical investigation and model simulation that the external debt may help improvement of intergenerational fairness with respect to optimal DICE scenario. The internal debt does not however lead to improvement of intergenerational fairness but provides the incentives for investing in CO2 abatement and helps to smooth a carbon tax.