Economics Webinar - Optimal Spatial Emission

We develop a multi-sector quantitative spatial model aimed at elucidating the optimal spatial distribution of carbon emissions. We develop sufficient statistics for optimal spatial carbon taxes, serving dual objectives. First, we approximate optimal spatial carbon taxes through linear algebra, leveraging observed spatial economic data and our derived sufficient statistics. Second, building upon these statistics, we present a simple iterative algorithm for calculating high-dimensional optimal spatial carbon taxes. Applying our model to the 2017 Chinese economy, we find that optimal spatial carbon taxes enhance Chinese welfare by 1.42%.