In the absence of a CO2 tax, the anticipation of a cheaper renewable backstop increases current emissions of CO2. Since the date at which renewables are phased in is brought forward and more generally future emissions of CO2 will decrease, the effect on global warming is unclear. Green welfare...

Our main message is that it is optimal to use less coal and more oil once one takes account of coal being a backstop which emits much more CO2 than oil. The way of achieving this is to have a steeply rising carbon tax during the initial oil-only phase, a less-steeply rising carbon tax during the...

Optimal climate policy is studied in a Ramsey growth model. A developing economy weighs global warming less, hence is more likely to exhaust fossil fuel and exacerbate global warming. The optimal carbon tax is higher for a developed economy. We analyze the optimal time of transition from fossil...