Global Demographic Change, Carbon Emissions, the Optimal Carbon Price and Carbon Abatement

Abstract

This paper empirically analyses the prospective impact of global demographic change on the time path of the optimal carbon price, global emissions and global carbon abatement. The approach is to apply a simple Ramsey model in order to examine the effect of global demographic change on the fundamental drivers of the optimal carbon price and optimal abatement. The results suggest a policy trade-off to some extent between mitigating population ageing and mitigating climate change. The lower fertility scenario, which implies an older future population, results in lower carbon emissions and therefore a lower optimal carbon price. Policies to mitigate population ageing would therefore increase carbon emissions and increase the carbon price.