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Taxation of a Polluting Non-Renewable Resource in the Heterogeneous World

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  • Grimaud, André

Abstract

This paper extends the literature on the taxation of polluting exhaustible resources by taking international heterogeneities and national tax-setting into account. We propose a two-country Romer model of endogenous growth in which the South is endowed with the stock of an essential polluting non-renewable resource and world economic growth is driven by a northern research sector. We consider the stock of pollution as affecting global welfare. First, we characterize the optimal environmental taxation policies. Second, we examine the impacts of national taxes. Their time profile determines the extraction path, the dynamics of pollution accumulation and that of world output. Their respective levels entail inter-country interactions by altering the efficiency of the world resource allocation, the tax revenues and the resource rents. We study isolatedly the distortional and distributional effects of local taxes. Then, we completely assess the overall impact of a unilateral tax increase. Finally, we find that, even if heterogeneous countries coordinate their taxation policies to correct the global environmental problem, their divergent strategic interests cause another global, non-environmental distortion in the allocation of the resource.

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Paper provided by Institut d'Économie Industrielle (IDEI), Toulouse in its series IDEI Working Papers with number 541.

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Date of creation: Feb 2009
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Publication status: Published in Environmental and Resource Economics, Springer Netherlands, 2010.
Handle: RePEc:ide:wpaper:10703

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  1. Gerlagh, R. & Kverndokk, S. & Rosendahl, K.E., 2009. "Optimal timing of climate change policy: Interaction between carbon taxes and innovation externalities," Open Access publications from Tilburg University urn:nbn:nl:ui:12-3777015, Tilburg University.
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  4. Schou, Poul, 2002. " When Environmental Policy Is Superfluous: Growth and Polluting Resources," Scandinavian Journal of Economics, Wiley Blackwell, vol. 104(4), pages 605-20, December.
  5. Grimaud, Andre & Rouge, Luc, 2005. "Polluting non-renewable resources, innovation and growth: welfare and environmental policy," Resource and Energy Economics, Elsevier, vol. 27(2), pages 109-129, June.
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  17. Goulder, Lawrence H. & Mathai, Koshy, 2000. "Optimal CO2 Abatement in the Presence of Induced Technological Change," Journal of Environmental Economics and Management, Elsevier, vol. 39(1), pages 1-38, January.
  18. Quadrelli, Roberta & Peterson, Sierra, 2007. "The energy-climate challenge: Recent trends in CO2 emissions from fuel combustion," Energy Policy, Elsevier, vol. 35(11), pages 5938-5952, November.
  19. Solow, Robert M, 1974. "The Economics of Resources or the Resources of Economics," American Economic Review, American Economic Association, vol. 64(2), pages 1-14, May.
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  26. Tsur, Yacov & Zemel, Amos, 2007. "Towards endogenous recombinant growth," Journal of Economic Dynamics and Control, Elsevier, vol. 31(11), pages 3459-3477, November.
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Citations

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Cited by:
  1. Julien Daubanes & Lisa Leinert, 2012. "Optimum Tariffs and Exhaustible Resources: Theory and Evidence for Gasoline," CER-ETH Economics working paper series 12/163, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich.
  2. Ruxanda Berlinschi & Julien Daubanes, 2009. "Prendre d’une main et donner de l’autre : taxation des produits pétroliers et aide internationale," Économie et Prévision, Programme National Persée, vol. 190(4), pages 21-37.
  3. Lucas Bretschger & Nujin Suphaphiphat, 2012. "Use Less, Pay More: Can Climate Policy Address the Unfortunate Event for Being Poor?," CEEES Paper Series CE3S-04/12, European University at St. Petersburg, Department of Economics.
  4. Giovanni Ganelli & Juha Tervala, 2010. "International Transmission of Environmental Policy: A New Keynesian Perspective," Discussion Papers 58, Aboa Centre for Economics.
  5. Lucas Bretschger & Simone Valente, 2013. "International Resource Tax Policies Beyond Rent Extraction," CER-ETH Economics working paper series 13/185, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich.
  6. Daubanes, Julien, 2009. "Taxation of Oil Products and GDP Dynamics of Oil-Rich Countries," TSE Working Papers 09-012, Toulouse School of Economics (TSE).
  7. DAUBANES Julien, 2009. "Changement climatique, instruments économiques et propositions pour un accord post-Kyoto : une synthèse," LERNA Working Papers 09.19.295, LERNA, University of Toulouse.
  8. Lucas Bretschger & Simone Valente, 2011. "International economics and natural resources: from theory to policy," International Economics and Economic Policy, Springer, vol. 8(2), pages 115-120, June.
  9. repec:ebl:ecbull:v:17:y:2008:i:13:p:1-11 is not listed on IDEAS
  10. Shkarlet, Serhiy & Petrakov, Iaroslav, 2013. "Environmental Taxation Evolution in Ukraine: Trends, Challenges and Outlook," MPRA Paper 45168, University Library of Munich, Germany, revised 18 May 2013.
  11. DAUBANES Julien, 2007. "On the Optimal Taxation of an Exhaustible Resource under Monopolistic Extraction," LERNA Working Papers 07.09.230, LERNA, University of Toulouse.
  12. Bretschger, Lucas & Valente, Simone, 2012. "Endogenous growth, asymmetric trade and resource dependence," Journal of Environmental Economics and Management, Elsevier, vol. 64(3), pages 301-311.
  13. BERLINSCHI Ruxanda & DAUBANES Julien, 2007. "Aid to Poor Resource Exporting Countries : Which Role Should be Played by Resource Taxation?," LERNA Working Papers 07.23.244, LERNA, University of Toulouse.
  14. Lucas Bretschger & Simone Valente, 2010. "Endogenous Growth, Asymmetric Trade and Resource Taxation," CER-ETH Economics working paper series 10/132, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich.
  15. DAUBANES Julien, 2007. "Fossil fuels supplied by oligopolies : On optimal taxation and rent capture," LERNA Working Papers 07.22.243, LERNA, University of Toulouse.

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