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What do we know about carbon taxes? an inquiry into their impacts on competitiveness and distribution of income

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Author Info
Zhang, ZhongXiang
Baranzini, Andrea

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Abstract

The Kyoto Protocol to the United Nations Framework Convention on Climate Change (UNFCCC) has set legally binding emissions targets for a basket of six greenhouse gases and timetables for industrialised countries. It has also incorporated three international flexibility mechanisms. However, the Articles defining the flexibility mechanisms carry wording that their use must be supplemental to domestic actions. This has led to the open debates on interpretations of these supplementarity provisions. Such debates ended at the resumed sixth Conference of the Parties (COP) to the UNFCCC, held in Bonn, July 2001, and at the subsequent COP-7 in Marrakesh, November 2001. The final wording in the Bonn Agreement, reaffirmed in the Marrakesh Accords, at least indicates that domestic policies will have an important role to play in meeting Annex B countries’ emissions commitments. Carbon taxes have long been advocated because of their cost-effectiveness in achieving a given emissions reduction. In this paper, the main economic impacts of carbon taxes are assessed. Based on a review of empirical studies on existing carbon/energy taxes, it is concluded that competitive losses and distributive impacts are generally not significant and definitely less than often perceived. However, given the ultimate objective of the Framework Convention, future carbon taxes could have higher rates than those already imposed and thus the resulting economic impacts could be more acute. In this context, it has been shown that how to use the generated fiscal revenues will be of fundamental importance in determining the final economic impacts of carbon taxes. Finally, we briefly discuss carbon taxes in combination with other domestic and international instruments.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 13225.

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Date of creation: Sep 2000
Date of revision: Jan 2003
Handle: RePEc:pra:mprapa:13225

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Related research
Keywords: Border tax adjustments; carbon taxes; distribution of income; double dividend; emissions trading; energy taxes; international competitiveness;

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Find related papers by JEL classification:
D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
Q52 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Pollution Control Costs; Distributional Effects; Employment Effects
F18 - International Economics - - Trade - - - Trade and Environment
R13 - Urban, Rural, and Regional Economics - - General Regional Economics - - - General Equilibrium and Welfare Economic Analysis of Regional Economies
Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy
Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounting
Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters
Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

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.:

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Cited by:
(explanations, 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.)

  1. Legge, Thomas & Scott, Susan, 2009. "Policy Options to Reduce Ireland's Greenhouse Gas Emissions," Research Series, Economic and Social Research Institute (ESRI), number RS9. [Downloadable!]
  2. Xavier Labandeira & Jose M. Labeaga & Miguel Rodriguez, 2004. "Microsimulating the Effects of Household Energy Price Changes in Spain," Public Economics 0412001, EconWPA, revised 02 Dec 2004. [Downloadable!]
    Other versions:
  3. Matthew Riddle & James Boyce, 2007. "Cap and Dividend: How to Curb Global Warming while Protecting the Incomes of American Families," Working Papers wp150, Political Economy Research Institute, University of Massachusetts at Amherst. [Downloadable!]
  4. Sato, S. & Grubb, M. & Cust, J. & Chan, K. & Korppoo, A. & Ceppi, P., 2007. "Differentiation and dynamics of competitiveness impacts from the EU ETS," Cambridge Working Papers in Economics 0712, Faculty of Economics, University of Cambridge. [Downloadable!]
  5. Kverndokk, Snorre & Rose , Adam, 2008. "Equity and Justice in Global Warming Policy," Memorandum 21/2008, Oslo University, Department of Economics. [Downloadable!]
    Other versions:
  6. Xavier Labandeira & José María Labeaga & Miguel Rodríguez, 2008. "The Costs of Kyoto Adjustments for Spanish Households," Working Papers 2008-02, FEDEA. [Downloadable!]
  7. Roland Ismer & Karsten Neuhoff, 2007. "Border tax adjustment: a feasible way to support stringent emission trading," European Journal of Law and Economics, Springer, vol. 24(2), pages 137-164, October. [Downloadable!] (restricted)
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