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Conference Agenda

Overview and details of the sessions of this conference. Please select a date or location to show only sessions at that day or location. Please select a single session for detailed view (with abstracts and downloads if available).

Please note that all times are shown in the time zone of the conference. The current conference time is: 10th Sept 2026, 07:05:09pm CEST (Norway)

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Daily Overview

Session

Policy tools for public goods provision
Location: Auditorium N: Agnar Sandmo
Session Chair: Stefanie Schmitt, University of Bamberg

Presentation 3

Pareto-improving climate policy with dynamic cost heterogeneity in the building sector

Matthias Kalkuhl^1,2, Maximilian Kellner¹, Noah Kögel^1,2, Lennart Stern¹

1: Potsdam Institute for Climate Impact Research (PIK), Germany; 2: University of Potsdam, Germany

Discussant: Stefanie Schmitt (University of Bamberg)

We build a dynamic model in which home owners decide when to switch to carbon-neutral heating. Agents differ with regard to carbon intensity and abatement costs, the latter being non-observable, private information. The heating-related investment model is nested in an overlapping generations Mirrlesian optimal taxation model with heterogeneous home ownership and labor productivity. We develop a compensation mechanism which guarantees a weak Pareto-improvement and averts potentially severe welfare losses due to horizontal heterogeneity when climate policy passes the cost-benefit test. The mechanism includes carbon pricing with category-based transfers, uniform ad-valorem subsidies on investments financed by public debt and an income tax adjustment proportional to mitigation benefits to service debt. We show that exact compensation of homeowners' dynamic abatement costs requires only minimal information: the interest rate and the fossil fuel price path. By means of exact compensation, our model utilizes the income-tax system to redistribute heterogeneous transformation costs between households according to any number of normative considerations without efficiency losses. We numerically illustrate subsidy rates and income tax adjustments for Germany.