"Carbon taxation is a widely proposed and in some countries already adopted means to limit anthropogenic climate change. This paper studies carbon taxation using an 18-region, 80- period overlapping generations model. We focus on carbon policy that delivers present and future mankind the highest uniform percentage welfare gain. The policy combines global carbon taxation and region- and generation-specific net transfers. In our main calibration, uniform welfare-improving carbon tax policy can make those agents already here and those yet to come, no matter their location, 4.35 percent better off. Achieving (such) equal proportionate gains, which may be needed for universal support, requires major interregional as well as intergenerational transfers. Universal support, though, is not essential. For example, even absent participation by China, whose projected carbon emissions are massive, the rest of the world can still materially limit the carbon externality. However, absent China, their optimal carbon tax is roughly half as large, and the uniform welfare-improving gain is less than three-fifths as large."

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