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Joint non-OPEC carbon taxes and the transfer of OPEC monopoly rents

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  • Dong, Yan
  • Whalley, John

Abstract

Carbon taxes have largely been discussed as individual country measures (even if taken simultaneously) aimed to reduce carbon emissions, slow global warning, and internalizing the externalities associated with carbon generating activities, such as power generation. There has however been little emphasis on the incentives for subgroups of countries to jointly peruse carbon taxes. Yet for large importers of oil such as the US, the EU and China, their incentive is clearly to act together and have their taxes partly or wholly borne by oil exporters given this incentives. This paper discusses the potential for joint OECD (or non-OPEC) carbon taxes to reduce OPEC's monopoly rent and provide benefits to non-OPEC countries provided jointly agreed trigger strategies are adhered to enforce mutual cooperation. To this end, we develop a multi-region general equilibrium structure with an endogenously determined oil supply by OPEC in which both emissions and energy prices are endogenously determined. Our results suggest that jointly enacted carbon taxes by the US, the EU and China can be heavily borne by oil exporters; they reduce the welfare of OPEC and increase the welfare of non-OPEC countries. These carbon taxes reduce global emissions, but the effect is small.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Policy Modeling.

Volume (Year): 34 (2012)
Issue (Month): 1 ()
Pages: 49-63

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Handle: RePEc:eee:jpolmo:v:34:y:2012:i:1:p:49-63

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Web page: http://www.elsevier.com/locate/inca/505735

Related research

Keywords: Carbon tax; non-OPEC; Monopoly rent; Global warming; Carbon emissions;

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References

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  1. Yuezhou Cai & Raymond Riezman & John Whalley, 2009. "International Trade and the Negotiability of Global Climate Change Agreements," NBER Working Papers 14711, National Bureau of Economic Research, Inc.
  2. Yan Dong & John Whalley, 2009. "Carbon Motivated Regional Trade Arrangements: Analytics and Simulations," NBER Working Papers 14880, National Bureau of Economic Research, Inc.
  3. Paul M. Bernstein & W. David Montgomery & Thomas F. Rutherford & Gui-Fang Yang, 1999. "Effects of Restrictions on International Permit Trading: The MS-MRT Model," The Energy Journal, International Association for Energy Economics, International Association for Energy Economics, vol. 0(Special I), pages 221-256.
  4. Liang, Qiao-Mei & Fan, Ying & Wei, Yi-Ming, 2007. "Carbon taxation policy in China: How to protect energy- and trade-intensive sectors?," Journal of Policy Modeling, Elsevier, Elsevier, vol. 29(2), pages 311-333.
  5. Terkla, David, 1984. "The efficiency value of effluent tax revenues," Journal of Environmental Economics and Management, Elsevier, vol. 11(2), pages 107-123, June.
  6. Yan Dong & John Whalley, 2008. "Carbon, Trade Policy, And Carbon Free Trade Areas," Trade Working Papers 22730, East Asian Bureau of Economic Research.
  7. Warwick J. McKibbin & Martin T. Ross & Robert Shackleton & Peter J. Wilcoxen, 1999. "Emissions Trading, Capital Flows and the Kyoto Protocol," The Energy Journal, International Association for Energy Economics, International Association for Energy Economics, vol. 0(Special I), pages 287-333.
  8. Jorgenson, D.W. & Wilcoxen, P.J., 1992. "Reducing US Carbon Dioxide Emissions: An Assessment of Different Instruments," Harvard Institute of Economic Research Working Papers 1590, Harvard - Institute of Economic Research.
  9. Barnett, Jon & Dessai, Suraje & Webber, Michael, 2004. "Will OPEC lose from the Kyoto Protocol?," Energy Policy, Elsevier, vol. 32(18), pages 2077-2088, December.
  10. Pearce, David W, 1991. "The Role of Carbon Taxes in Adjusting to Global Warming," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 101(407), pages 938-48, July.
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Cited by:
  1. Nanthakumar, Loganathan & Shahbaz, Muhammad & Taha, Roshaiza, 2014. "The Effect of Green Taxation and Economic Growth on Environment Hazards: The Case of Malaysia," MPRA Paper 56843, University Library of Munich, Germany, revised 23 Jun 2014.
  2. Boeters, Stefan & Bollen, Johannes, 2012. "Fossil fuel supply, leakage and the effectiveness of border measures in climate policy," Energy Economics, Elsevier, vol. 34(S2), pages S181-S189.

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