Location:  368A Heady  Hall

Description: Larry Karp (University of California, Berkeley)

"Asset prices and climate policy"

Abstract:  If climate-related damages lower productivity, climate policy increases future productivity. When the production possibility frontier between an investment and a consumption good is strictly concave, the price of investment — not just the level of investment — is endogenous. Current climate policy can increase the endogenous price of capital, benefitting current generations and providing a self-interested rationale for them to adopt climate policy. Asset markets transfer future policy-related benefits to currently living generations; either the old or the young might appropriate those benefits. A political economy equilibrium involving self-interested agents can support a significant level of abatement.

Contact Person:  Quinn Weninger