Optimal Carbon Prices in an Unequal World: The Role of Regional Welfare Weights (opens in new tab)

How should nations price carbon? This paper examines how the treatment of global inequality, captured by regional welfare weights, affects optimal carbon prices. I develop theory to identify the conditions under which accounting for differences in marginal utilities of consumption across countries leads to more stringent global climate policy in the absence of international transfers. I further establish a connection between the optimal unif...