Climate Policy and Optimal Public Debt

Konferenzbeitrag

This paper analyzes the optimal level of public debt when taxes are used not only for funding public expenditures but also for correcting externalities from climate change. Taking into account externalities may imply the optimal policy to deviate from tax smoothing. Provided accumulated marginal damages from today's consumption are larger than those from tomorrow's consumption, the inclusion of environmental externalities decreases (increases) optimal public debt if tax rates are on the increasing (decreasing) side of the Laffer curve. The reversed holds if the accumulated marginal damage increases over time. Allowing for endogenous adaptation investments reduces the deviation from tax smoothing.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Beiträge zur Jahrestagung des Vereins für Socialpolitik 2018: Digitale Wirtschaft - Session: Environmental Economics II ; No. B06-V1

Classification and Topics

• Classification: Wirtschaft ; Taxation and Subsidies: Externalities; Redistributive Effects; Environmental Taxes and Subsidies ; National Debt; Debt Management; Sovereign Debt ; Climate; Natural Disasters and Their Management; Global Warming ; Environmental Economics: Government Policy
• Subject: environmental externality ; public debt ; tax smoothing

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Runkel, Marco ; Kellner, Maximilian
• Event: Veröffentlichung
• (who): ZBW - Leibniz-Informationszentrum Wirtschaft
• (where): Kiel, Hamburg
• (when): 2018

Further information

• Handle: http://hdl.handle.net/10419/181639
• Last update: 10.03.2025, 11:45 AM CET