https://macropaperwarehouse.com/authors/haosui-duanmu/Haosui DuanmuHugo -- gohugo.ioen-ushttps://macropaperwarehouse.com/papers/cap-and-trade-and-carbon-tax-meet-arrowdebreu/https://macropaperwarehouse.com/papers/cap-and-trade-and-carbon-tax-meet-arrowdebreu/<p><strong>Research Question</strong></p> <p>Anderson and Duanmu (2025) ask how general equilibrium (GE) interactions — factor reallocation across sectors, capital misallocation under climate uncertainty, and the distributional incidence of damages — alter the social cost of carbon (SCC) relative to the partial equilibrium (PE) estimates embedded in standard integrated assessment models (IAMs). The paper also characterizes conditions for Pareto improvements through climate policy and derives the optimal carbon tax in second-best environments with pre-existing distortions.</p>