Modified Ramsey Rule and Optimal Carbon Tax ()
ABSTRACT
The Ramsey rule is regarded as a convenient vehicle for estimating the
social discount rate in general. Carbon pricing is treated as another theory of
environmental economics. This study clarifies the theoretical relationship
between the Ramsey rule and optimal carbon price, which has been overlooked in
the existing research. It succeeds in deriving the optimal carbon price from
the modified Ramsey rule in stationary state. Since the Ramsey rule decides the
dynamics of an economy and a stationary state is its destination, by using the
optimization condition of individual who are assumed to live infinitesimally
short life, we can solve the optimal carbon price at stationary state.
Share and Cite:
Otaki, M. (2016) Modified Ramsey Rule and Optimal Carbon Tax.
Atmospheric and Climate Sciences,
6, 267-272. doi:
10.4236/acs.2016.62022.
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