Optimal Carbon Capture and Storage Policies

The IPCC recommends the use of carbon capture and sequestration (CCS) technologies in order to achieve the Kyoto environmental goals. This paper sheds light on this issue by assessing the optimal strategy regarding the long-term use of CCS technologies. The aim is to analyze the optimal CCS policy when the sequestration rate is endogenous, being therefore one specific tool of the environmental policy. We develop a simple growth model to identify the main driving forces that should determine the optimal CCS policy. We show that, under some conditions on the cost of extractions, CCS may be a long-term solution to curb carbon emissions. We also show that over time the social planner will choose to decrease the rate of capture and sequestration. We then derive the decentralized equilibrium outcome by considering the programs of the fossil resource-holder and of the representative consumer. Finally, we determine the optimal environmental policy, i.e. the carbon tax scheme, as well as the dynamics of the fossil fuel price needed to implement it.     

Double dividend hypothesis, golden rule and welfare distribution

This paper analyzes the double dividend issues within the framework of overlapping generations models. We characterize the necessary conditions for obtaining a double dividend, i.e. an improvement of environmental and non-environmental welfare when the revenue from the pollution tax is recycled into a change in the labor tax rate. We show that, depending on the initial capital stock and on the intertemporal elasticity of substitution, conditions may be defined to simultaneously allow (i) the obtaining of a long-term double dividend, (ii) the economy to move closer to the modified golden rule and (iii) in the short term, an improvement in the welfare of the two present generations.