Carbon Taxes and Joint Implementation. An Applied General Equilibrium Analysis for Germany and India
AbstractGermany has committed itself toreducing its carbon emissions by 25 percent in2005 as compared to 1990 emission levels. Toachieve this goal, the government has recentlylaunched an environmental tax reform whichentails a continuous increase in energy taxesin conjunction with a revenue-neutral cut innon-wage labor costs. This policy is supposedto yield a double dividend, reducing both, theproblem of global warming and high unemploymentrates. In addition to domestic actions,international treaties on climate protectionallow for the supplementary use of flexibleinstruments to exploit cheaper emissionreduction possibilities elsewhere. One concreteoption for Germany would be to enter jointimplementation (JI) with developing countriessuch as India where Germany pays emissionreduction abroad rather than meeting itsreduction target solely by domestic action. Inthis paper, we investigate whether anenvironmental tax reform cum JI providesemployment and overall efficiency gains ascompared to an environmental tax reformstand-alone. We address this question in theframework of a large-scale general equilibriummodel for Germany and India where Germany mayundertake JI with the Indian electricitysector. Our main finding is that JI offsetslargely the adverse effects of carbon emissionconstraints on the German economy. JIsignificantly lowers the level of carbon taxesand thus reduces the total costs of abatementas well as negative effects on labor demand. Inaddition, JI triggers direct investment demandfor energy efficient power plants produced inGermany. This provides positive employmenteffects and additional income for Germany. ForIndia, joint implementation equips itselectricity industry with scarce capital goodsleading to a more efficient power productionwith lower electricity prices for the economyand substantial welfare gains. Copyright Kluwer Academic Publishers 2003
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Bibliographic InfoArticle provided by European Association of Environmental and Resource Economists in its journal Environmental and Resource Economics.
Volume (Year): 24 (2003)
Issue (Month): 1 (January)
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computable general equilibrium modeling; energy efficiency improvement; environmental tax reform; joint implementation; productivity gaps;
Other versions of this item:
- Böhringer, Christoph & Conrad, Klaus & Löschel, Andreas, 2000. "Carbon Taxes and Joint Implementation An applied general equilibrium analysis for Germany and India," Discussion Papers 591, Institut fuer Volkswirtschaftslehre und Statistik, Abteilung fuer Volkswirtschaftslehre.
- Q25 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Water
- F20 - International Economics - - International Factor Movements and International Business - - - General
- D58 - Microeconomics - - General Equilibrium and Disequilibrium - - - Computable and Other Applied General Equilibrium Models
- D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
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