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Introduction to the Economics of Atmospheric Carbon-Dioxide Control

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Abstract

The objective of this paper is to provide an introduction to the economics of controlling the stock of carbon-dioxide in the atmosphere. The paper starts with a brief summary of the arguments against a wait-and-see strategy and in favour of controlling carbon emissions. It then provides a basic analysis of the effect of carbon tax on net-cash flow maximising agents’ emissions and offers two possible ways for setting the tax rate. The first one computes an atmospheric carbon-dioxide stock-targeting tax rate with abstinence of some agents, whereas the second considers universal cooperation and computes a welfare-maximising carbon-tax rate. While these computations assume a fixed rate of depletion of the atmospheric stock of carbon dioxide, the last section takes the depletion rate to be dependent on the distribution of the usable land between plants and humans and the change in the usable land to be dependent on the change in the atmospheric carbon-dioxide stock. The usable land allocation required for achieving a target stock of atmospheric carbon dioxide is subsequently computed.

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File URL: http://www.uow.edu.au/content/groups/public/@web/@commerce/@econ/documents/doc/uow110538.pdf
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Bibliographic Info

Paper provided by School of Economics, University of Wollongong, NSW, Australia in its series Economics Working Papers with number wp11-07.

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Length: 15 pages
Date of creation: 2011
Date of revision:
Handle: RePEc:uow:depec1:wp11-07

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Postal: School of Economics, University of Wollongong, Northfields Avenue, Wollongong NSW 2522 Australia
Phone: +612 4221-3659
Fax: +612 4221-3725
Web page: http://business.uow.edu.au/econ/index.html
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Related research

Keywords: Emissions; Carbon-Cycle Imbalance; Atmospheric Carbon Stock; Global Warming; Usable land: Control Measures; Carbon Tax; Plants-Humans Land Allocation;

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  1. Amnon Levy, 2011. "Abstinence with Reputation Loss, Understating Expectations and Guiltand the Effectiveness of Emission Tax," Economics Working Papers wp11-12, School of Economics, University of Wollongong, NSW, Australia.
  2. Pizer, William & Newell, Richard, 1998. "Regulating Stock Externalities Under Uncertainty," Discussion Papers dp-99-10-rev, Resources For the Future.
  3. Hoel, Michael & Karp, Larry, 2001. "Taxes versus Quotas for a Stock Pollutant," Department of Agricultural & Resource Economics, UC Berkeley, Working Paper Series qt5fx9p7kf, Department of Agricultural & Resource Economics, UC Berkeley.
  4. Fischer, Carolyn & Newell, Richard G., 2008. "Environmental and technology policies for climate mitigation," Journal of Environmental Economics and Management, Elsevier, vol. 55(2), pages 142-162, March.
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