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Climate Change and Carbon Tax Expectations

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  • Michael Hoel
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    Abstract

    If governments cannot commit to future carbon tax rates, investments in greenhouse gas mitigation will be based on uncertain and/or wrong predictions about these tax rates. Predictions about future carbon tax rates are also important for decisions made by owners of non-renewable carbon resources. The effects of the size of expected future carbon taxes on near-term emissions and investments in substitutes for carbon energy depend significantly on how rapidly extraction costs increase with increasing total extraction. In addition, the time profile of the returns to investments in non-carbon substitutes is important for the effects on emissions and investments.

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    File URL: http://www.cesifo-group.de/portal/page/portal/DocBase_Content/WP/WP-CESifo_Working_Papers/wp-cesifo-2010/wp-cesifo-2010-02/cesifo1_wp2966_rev.pdf
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    Bibliographic Info

    Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 2966.

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    Date of creation: 2010
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    Handle: RePEc:ces:ceswps:_2966

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    Related research

    Keywords: climate change; carbon tax; green paradox; commitment; exhaustible resources;

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    References

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    1. Snorre Kverndokk, 1994. "Depletion of Fossil Fuels and the impact of Global Warming," Discussion Papers 107, Research Department of Statistics Norway.
    2. Reyer Gerlagh, 2011. "Too Much Oil," CESifo Economic Studies, CESifo, vol. 57(1), pages 79-102, March.
    3. Donald A. Hanson, 1980. "Increasing Extraction Costs and Resource Prices: Some Further Results," Bell Journal of Economics, The RAND Corporation, vol. 11(1), pages 335-342, Spring.
    4. Hans-Werner Sinn, 2008. "Public policies against global warming: a supply side approach," International Tax and Public Finance, Springer, vol. 15(4), pages 360-394, August.
    5. Ulph, Alistair & Ulph, David, 2009. "Optimal Climate Change Policies When Governments Cannot Commit," SIRE Discussion Papers 2009-42, Scottish Institute for Research in Economics (SIRE).
    6. Ulph, Alistair & Ulph, David, 1994. "The Optimal Time Path of a Carbon Tax," Oxford Economic Papers, Oxford University Press, vol. 46(0), pages 857-68, Supplemen.
    7. Laffont, J.J. & Tirole, J., 1995. "Pollution Permits and Environmental Innovation," Papers 95.396, Toulouse - GREMAQ.
    8. Withagen, Cees, 1994. "Pollution and exhaustibility of fossil fuels," Resource and Energy Economics, Elsevier, vol. 16(3), pages 235-242, August.
    9. Olli Tahvonen, 1997. "Fossil Fuels, Stock Externalities, and Backstop Technology," Canadian Journal of Economics, Canadian Economics Association, vol. 30(4), pages 855-74, November.
    10. Michael Hoel, 2008. "Bush Meets Hotelling: Effects of Improved Renewable Energy Technology on Greenhouse Gas Emissions," CESifo Working Paper Series 2492, CESifo Group Munich.
    11. Alistair Ulph & David Ulph, 2009. "Optimal Climate Change Policies When Governments Cannot Commit," Discussion Paper Series, Department of Economics 200909, Department of Economics, University of St. Andrews.
    12. Olli Tahvonen, 1995. "Dynamics of pollution control when damage is sensitive to the rate of pollution accumulation," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 5(1), pages 9-27, January.
    13. Jon Strand, 2007. "Technology Treaties and Fossil-Fuels Extraction," The Energy Journal, International Association for Energy Economics, vol. 0(Number 4), pages 129-142.
    14. Sinclair, Peter J N, 1992. "High Does Nothing and Rising Is Worse: Carbon Taxes Should Keep Declining to Cut Harmful Emissions," The Manchester School of Economic & Social Studies, University of Manchester, vol. 60(1), pages 41-52, March.
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    Cited by:
    1. Daniel Nachtigall & Dirk Rübbelke, 2013. "The Green Paradox and Learning-by-doing in the Renewable Energy Sector," Working Papers 2013-09, BC3.
    2. Darko Jus & Volker Meier, 2012. "Announcing is Bad, Delaying is Worse: Another Pitfall in Well-Intended Climate Policy," CESifo Working Paper Series 3844, CESifo Group Munich.
    3. Edwin van der Werf & Corrado Di Maria, 2011. "Unintended Detrimental Effects of Environmental Policy: The Green Paradox and Beyond," CESifo Working Paper Series 3466, CESifo Group Munich.

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