Intergenerational Discounting and Market Rate of Return in OLG Version of RICE Model

摘要

In this paper we propose an extension of the Regional Integrated model of Climate and Economy(RICE), where we introduce overlapping generations (OLG) in the original model and considercompetitive equilibrium with the regional governments, that follow Ramsey type optimal policy ongreenhouse gases emissions reduction. In this framework it is possible to distinguish betweensubjective discount rate of individuals and social discount rate of the governments. Thus the modelprovides two discount rates in the OLG model: the social discount rate under which costs benefitsanalysis of climate projects are evaluated and the market discount rate for investments in physicalcapital. We analyze how calibration of the social time preferences influences outcomes on emissionreduction and real returns in Nash equilibrium and in grand coalition.