Advanced Search
MyIDEAS: Login to save this article or follow this journal

An integrated tax-subsidy policy for carbon emission reduction

Contents:

Author Info

  • Galinato, Gregmar I.
  • Yoder, Jonathan K.

Abstract

A carbon tax is often cited by economists as an effective instrument to mitigate greenhouse gas emissions, but there is little political interest in the United States. In light of this political unpopularity, we develop and examine a net-revenue constrained carbon tax and subsidy program. The optimal revenue constrained tax and subsidy schedule based on our utility maximization model taxes energy sources with high emissions to energy price ratio, and subsidizes sources with low emissions to energy price ratios. This approach may be more palatable than a traditional carbon tax because it can change the relative price of low and high emissions energy sources while providing a mechanism to limit net tax increases and energy price increases. We find that a constrained tax/subsidy program provides welfare gains relative to a no-tax scenario. Welfare gains are estimated to be 1% and 36% of the welfare gains from a Pigouvian tax for the motor fuels industry and electric power industry, respectively. In contrast, subsidies for low-emitting energy sources funded from general tax funds rather than from high-emission energy tax revenues lead to welfare decreases substantially below our proposed tax/subsidy policy approach.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.sciencedirect.com/science/article/B6VFJ-4XHVH0K-1/2/d2a9a584c3dea57c0665864e398c4d8b
Download Restriction: Full text for ScienceDirect subscribers only

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Bibliographic Info

Article provided by Elsevier in its journal Resource and Energy Economics.

Volume (Year): 32 (2010)
Issue (Month): 3 (August)
Pages: 310-326

as in new window
Handle: RePEc:eee:resene:v:32:y:2010:i:3:p:310-326

Contact details of provider:
Web page: http://www.elsevier.com/locate/inca/505569

Related research

Keywords: Non-renewable resources Carbon tax Carbon dioxide emissions Revenue neutral;

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Pizer, William A., 2002. "Combining price and quantity controls to mitigate global climate change," Journal of Public Economics, Elsevier, vol. 85(3), pages 409-434, September.
  2. Fischer, Carolyn & Newell, Richard G., 2008. "Environmental and technology policies for climate mitigation," Journal of Environmental Economics and Management, Elsevier, vol. 55(2), pages 142-162, March.
  3. Goulder, Lawrence & Bovenberg, A. Lans, 2000. "Neutralizing the Adverse Industry Impacts of CO2 Abatement Policies: What Does It Cost?," Discussion Papers dp-00-27, Resources For the Future.
  4. Gilbert E. Metcalf, 2008. "Designing A Carbon Tax to Reduce U.S. Greenhouse Gas Emissions," NBER Working Papers 14375, National Bureau of Economic Research, Inc.
  5. Newell, Richard G. & Pizer, William A., 2003. "Regulating stock externalities under uncertainty," Journal of Environmental Economics and Management, Elsevier, vol. 45(2, Supple), pages 416-432, March.
  6. Johnson, Kenneth C., 2006. "Feebates: An effective regulatory instrument for cost-constrained environmental policy," Energy Policy, Elsevier, vol. 34(18), pages 3965-3976, December.
  7. Parry, Ian & Small, Kenneth, 2002. "Does Britain or the United States Have the Right Gasoline Tax?," Discussion Papers dp-02-12-, Resources For the Future.
  8. Kopczuk, Wojciech, 2003. "A note on optimal taxation in the presence of externalities," Economics Letters, Elsevier, vol. 80(1), pages 81-86, July.
  9. Chouinard, Hayley & Perloff, Jeffrey M, 2003. "Incidence of federal and state gasoline taxes," CUDARE Working Paper Series 952, University of California at Berkeley, Department of Agricultural and Resource Economics and Policy.
  10. Hoel, Michael & Karp, Larry, 2001. "Taxes versus Quotas for a Stock Pollutant," Department of Agricultural & Resource Economics, UC Berkeley, Working Paper Series qt5fx9p7kf, Department of Agricultural & Resource Economics, UC Berkeley.
  11. Frank J. Convery, 2009. "Reflections--The Emerging Literature on Emissions Trading in Europe," Review of Environmental Economics and Policy, Association of Environmental and Resource Economists, vol. 3(1), pages 121-137, Winter.
  12. Ian Parry, 1998. "A Second-Best Analysis of Environmental Subsidies," International Tax and Public Finance, Springer, vol. 5(2), pages 153-170, May.
  13. Holland, Stephen P. & Knittel, Christopher R & Hughes, Jonathan E., 2008. "Greenhouse Gas Reductions under Low Carbon Fuel Standards?," Institute of Transportation Studies, Working Paper Series qt9gh5b4rv, Institute of Transportation Studies, UC Davis.
  14. Searchinger, Timothy & Heimlich, Ralph & Houghton, R. A. & Dong, Fengxia & Elobeid, Amani & Fabiosa, Jacinto F. & Tokgoz, Simla & Hayes, Dermot J. & Yu, Hun-Hsiang, 2008. "Use of U.S. Croplands for Biofuels Increases Greenhouse Gases Through Emissions from Land-Use Change," Staff General Research Papers 12881, Iowa State University, Department of Economics.
  15. Hammar, Henrik & Jagers, Sverker C., 2007. "What is a fair CO2 tax increase? On fair emission reductions in the transport sector," Ecological Economics, Elsevier, vol. 61(2-3), pages 377-387, March.
  16. Train, Kenneth E. & Davis, William B. & Levine, Mark D., 1997. "Fees and rebates on new vehicles: Impacts on fuel efficiency, carbon dioxide emissions, and consumer surplus," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 33(1), pages 1-13, March.
  17. Tol, Richard S. J., 2005. "The marginal damage costs of carbon dioxide emissions: an assessment of the uncertainties," Energy Policy, Elsevier, vol. 33(16), pages 2064-2074, November.
  18. Warwick J. McKibbin & Peter J. Wilcoxen, 2002. "The Role of Economics in Climate Change Policy," Journal of Economic Perspectives, American Economic Association, vol. 16(2), pages 107-129, Spring.
  19. Greene, David L. & Patterson, Philip D. & Singh, Margaret & Li, Jia, 2005. "Feebates, rebates and gas-guzzler taxes: a study of incentives for increased fuel economy," Energy Policy, Elsevier, vol. 33(6), pages 757-775, April.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Abolhosseini, Shahrouz & Heshmati, Almas & Altmann, Jörn, 2014. "The Effect of Renewable Energy Development on Carbon Emission Reduction: An Empirical Analysis for the EU-15 Countries," IZA Discussion Papers 7989, Institute for the Study of Labor (IZA).
  2. Amigues, Jean-Pierre & Chakravorty, Ujjayant & Lafforgue, Gilles & Moreaux, Michel, 2012. "Renewable Portfolio Standards and implicit tax-subsidy schemes: Structural differences induced by quantity and proportional mandates," TSE Working Papers 12-278, Toulouse School of Economics (TSE).
  3. Anping Chen & Nicolaas Groenewold, 2013. "Regional Effects in China of an Emissions-Reduction Policy: Tax v. Subsidy," ERSA conference papers ersa13p1275, European Regional Science Association.
  4. Matthias Kalkuhl & Ottmar Edenhofer & Kai Lessmann, 2011. "Renewable Energy Subsidies: Second-Best Policy or Fatal Aberration for Mitigation?," Working Papers 2011.48, Fondazione Eni Enrico Mattei.
  5. Abolhosseini, Shahrouz & Heshmati, Almas, 2014. "The Main Support Mechanisms to Finance Renewable Energy Development," IZA Discussion Papers 8182, Institute for the Study of Labor (IZA).
  6. Robert Main, 2013. "Subsidizing Non-Polluting Goods vs. Taxing Polluting Goods for Pollution Reduction," Atlantic Economic Journal, International Atlantic Economic Society, vol. 41(4), pages 349-362, December.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:eee:resene:v:32:y:2010:i:3:p:310-326. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.