Advanced Search
MyIDEAS: Login to save this paper or follow this series

Optimal Fuel-Specific Carbon Pricing and Time Dimension of Leakage

Contents:

Author Info

  • Habermacher, Florian

    ()

Abstract

All current, and likely near-term future, climate protection measures only cover a limited fraction of global emissions. A single value attached to CO2 (independent of the source that generates it), for market based instruments such as CO2 taxes or cap-and-trade systems, is insufficient to account for the complex economic interlinkages between specific emission-generating activities and CO2 emissions throughout the world. First, static partial and general equilibrium models illustrate how different types of emissions are subject to specific General Equilibrium Translation Factors and leakage effects, which define the optimal pattern of fuel-specific, unilateral carbon taxes. The leakage, which implies that regional emission avoidance may partly be offset in other regions and time periods, depends on the type of resources involved and the characteristics of the markets in which they are traded. Second, a dynamic model accounting for fuel exhaustibility shows that the time-dimension is crucial and that the relevant medium-term leakage may be much larger than suggested static rates. Sensible leakage rates depend on discount rates for future emissions and on uncertain future technological and political developments. The traditional leakage literature does not explicitly consider these elements, even though in their absence overall leakage would approach 100 %. Instead, literature has mainly focused on static fuel supply curves and rates of contemporaneous leakage. The numerical simulations show that in a business-as-usual scenario the optimal unilateral OECD climate tax rate on CO2 emissions from oil may be only half of the tax rate on emissions from coal. This is reverted if the CO2 intensive coal-to-liquids conversion processes become an important additional source of liquid fuels in future: negative leakage occurs and the optimal current climate tax on oil emissions may be up to two times the genuine regional willingness to pay for global emission reductions, even if the substitution of crude oil by synthetic liquids starts only in the future.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www1.vwa.unisg.ch/RePEc/usg/econwp/EWP-1144.pdf
Download Restriction: no

Bibliographic Info

Paper provided by University of St. Gallen, School of Economics and Political Science in its series Economics Working Paper Series with number 1144.

as in new window
Length: 58 pages
Date of creation: Nov 2011
Date of revision: Jan 2012
Handle: RePEc:usg:econwp:2011:44

Contact details of provider:
Postal: Dufourstrasse 50, CH - 9000 St.Gallen
Phone: +41 71 224 23 25
Fax: +41 71 224 31 35
Email:
Web page: http://www.seps.unisg.ch/
More information through EDIRC

Related research

Keywords: Unilateral climate policy; fuel specific carbon tax; fossil fuel exhaustion/depletion; leakage over time; general equilibrium resource market; coal-to-liquids; liquefaction; OECD.;

Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:

References

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.:
as in new window
  1. Jean-Marc Burniaux & Joaquim Oliveira Martins, 2012. "Carbon leakages: a general equilibrium view," Economic Theory, Springer, Springer, vol. 49(2), pages 473-495, February.
  2. James M. Poterba, 1991. "Tax Policy to Combat Global Warming: On Designing a Carbon Tax," NBER Working Papers 3649, National Bureau of Economic Research, Inc.
  3. Corrado Di Maria & Edwin van der Werf, 2006. "Carbon Leakage Revisited: Unilateral Climate Policy with Directed Technical Change," Working Papers, Fondazione Eni Enrico Mattei 2006.94, Fondazione Eni Enrico Mattei.
  4. Michael Hoel, 2010. "Is there a Green Paradox?," CESifo Working Paper Series 3168, CESifo Group Munich.
  5. Habermacher, Florian & Kirchgässner, Gebhard, 2011. "Climate Effects of Carbon Taxes, Taking into Account Possible Other Future Climate Measures," Economics Working Paper Series 1110, University of St. Gallen, School of Economics and Political Science.
  6. Felder Stefan & Rutherford Thomas F., 1993. "Unilateral CO2 Reductions and Carbon Leakage: The Consequences of International Trade in Oil and Basic Materials," Journal of Environmental Economics and Management, Elsevier, vol. 25(2), pages 162-176, September.
  7. Lanz, Bruno & Rausch, Sebastian, 2011. "General equilibrium, electricity generation technologies and the cost of carbon abatement: A structural sensitivity analysis," Energy Economics, Elsevier, Elsevier, vol. 33(5), pages 1035-1047, September.
  8. Böhringer, Christoph & Lange, Andreas & Rutherford, Thomas F., 2014. "Optimal emission pricing in the presence of international spillovers: Decomposing leakage and terms-of-trade motives," Journal of Public Economics, Elsevier, Elsevier, vol. 110(C), pages 101-111.
Full references (including those not matched with items on IDEAS)

Citations

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:usg:econwp:2011:44. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Martina Flockerzi).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.