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Distribution Matters � Taxes vs. Emissions Trading in Post Kyoto Climate Regimes

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  • Sonja Peterson
  • Gernot Klepper

Abstract

The policy instruments for emissions reductions will be an integral part of a Post Kyoto Climate Regime. In this paper we compare a harmonized international carbon tax to a cap and trade system with different allocation rules for the emission caps. The caps are based either on the requirement for equal percentage reductions in all countries or the “contraction and convergence” proposal that leads to converging per capita emission rights. The quantitative analysis is based on simulations with the CGE model DART. The harmonized carbon tax tends to favor industrialized countries but is less favorable to developing countries. The welfare effects of a cap and trade system depend crucially on the allocation rule for emission rights. The “contraction and convergence” approach leads to welfare gains for countries like China, India and Subsaharan Africa whereas it imposes welfare losses upon industrialized countries which are larger than those under other cap and trade schemes or a tax scenario. Independent from the allocation rule that is used regions exporting fossil fuels experience strong welfare losses from the reduction in the demand for fossil fuels and the fall in prices that results from the imposition of the international climate policies.

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File URL: https://www.ifw-members.ifw-kiel.de/publications/distribution-matters-taxes-vs-emissions-trading-in-post-kyoto-climate-regimes/Post-Kyoto-final%20inkl%20Titelblatter.pdf
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Bibliographic Info

Paper provided by Kiel Institute for the World Economy in its series Kiel Working Papers with number 1380.

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Length: 26 pages
Date of creation: Sep 2007
Date of revision:
Handle: RePEc:kie:kieliw:1380

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Keywords: Post Kyoto; emission targets; emission trading; taxes; distribution;

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References

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  1. Bohringer, Christoph & Welsch, Heinz, 2004. "Contraction and Convergence of carbon emissions: an intertemporal multi-region CGE analysis," Journal of Policy Modeling, Elsevier, Elsevier, vol. 26(1), pages 21-39, January.
  2. Klepper, Gernot & Peterson, Sonja, 2006. "Marginal abatement cost curves in general equilibrium: The influence of world energy prices," Resource and Energy Economics, Elsevier, Elsevier, vol. 28(1), pages 1-23, January.
  3. den Elzen, Michel & Lucas, Paul & Vuuren, Detlef van, 2005. "Abatement costs of post-Kyoto climate regimes," Energy Policy, Elsevier, Elsevier, vol. 33(16), pages 2138-2151, November.
  4. Gernot Klepper & Sonja Peterson & Katrin Springer, 2003. "DART97: A Description of the Multi-regional, Multi-sectoral Trade Model for the Analysis of Climate Policies," Kiel Working Papers 1149, Kiel Institute for the World Economy.
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Cited by:
  1. Ingrid Ott & Susanne Soretz, 2006. "Governmental activity, integration, and agglomeration," Working Paper Series in Economics, University of Lüneburg, Institute of Economics 57, University of Lüneburg, Institute of Economics.
  2. Thomas Eichner & Rüdiger Pethig, 2009. "Taxing and trading carbon emissions in the EU: Distributional comparisons of mixed policies," Volkswirtschaftliche Diskussionsbeiträge, Universität Siegen, Fakultät Wirtschaftswissenschaften, Wirtschaftsinformatik und Wirtschaftsrecht 135-09, Universität Siegen, Fakultät Wirtschaftswissenschaften, Wirtschaftsinformatik und Wirtschaftsrecht.
  3. Peterson, Everett B. & Schleich, Joachim & Duscha, Vicki, 2011. "Environmental and economic effects of the Copenhagen pledges and more ambitious emission reduction targets," Energy Policy, Elsevier, Elsevier, vol. 39(6), pages 3697-3708, June.
  4. Sonja Peterson & Gernot Klepper, 2008. "The competitiveness effects of the EU climate policy," Kiel Working Papers 1464, Kiel Institute for the World Economy.

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