Christian P. Traeger

Risk and Aversion in Assessing Climate Policy

Future economic damages from climate change are highly uncertain. Using a stochastic integrated assessment model, Christian Traeger and Benjamin Crost show how this damage uncertainty affects the optimal carbon tax, emission path, and temperature trajectory. Whereas uncertainty over the damage coefficient reduces the carbon tax, uncertainty over the damage exponent increases the optimal carbon tax more significantly. The researchers show that the optimal carbon tax approximately doubles when using the Epstein-Zin-Weil preferences, which better calibrate the model to observed asset pricing premia.

Mr Traeger's main research fields are environmental economics; intertemporal welfare analysis and decision theory with a focus on climate change; representation and evaluation of uncertainty; and discounting and cost benefit analysis.

During his stay in Munich, Mr Traeger will work jointly with Ifo researchers on developing dynamic stochastic models of investments and green energy transition in the face of climate change and uncertain beliefs governing future technological innovation and climate agreements.

Christian Traeger is an Associate Professor at the Department of Economics at the University of Oslo on leave from the Department of Agricultural & Resource Economics at the University of California Berkeley. He is a Research Director at the Ifo Center for Energy, Climate and Exhaustible Resources. He holds an MA in Physics from SUNY Stony Brook and an MA and PhD in Economics from the University of Heidelberg.