Dynamic climate policy with both strategic and non-strategic agents : taxes versus quantities
AbstractThis paper studies a dynamic game where each of two large blocs, of fossil fuel importers and exporters respectively, sets either taxes or quotas to exercise power in fossil-fuel markets. The main novel feature is the inclusion of a"fringe"of non- strategic (emerging and developing) countries which both consume and produce fossil fuels. Cumulated emissions over time from global fossil fuel consumption create climate damages which are considered by both the strategic importer and the non-strategic countries. Markov perfect equilibria are examined under the four combinations of trade policies and compared with the corresponding static games where climate damages are given (not stock-related). The main results are that taxes always dominate quota policies for both the strategic importer and exporter and that"fringe"countries bene?t from a tax policy as compared with a quota policy for the strategic importer, as the import fuel price then is lower, and the strategic importer's fuel consumption is also lower, thus causing fewer climate damages.
Download InfoIf 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.
Bibliographic InfoPaper provided by The World Bank in its series Policy Research Working Paper Series with number 6679.
Date of creation: 01 Oct 2013
Date of revision:
Economic Theory&Research; Climate Change Economics; Markets and Market Access; Debt Markets; Emerging Markets;
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-11-09 (All new papers)
- NEP-ENE-2013-11-09 (Energy Economics)
- NEP-ENV-2013-11-09 (Environmental Economics)
- NEP-GTH-2013-11-09 (Game Theory)
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.:
- Amundsen, E.S. & Schob, R., 1999.
"Environmental Taxes on Exhaustible Resources,"
Norway; Department of Economics, University of Bergen, Department of Economics, University of Bergen
192, Department of Economics, University of Bergen.
- Tower, Edward, 1975. "The Optimum Quota and Retaliation," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 42(4), pages 623-30, October.
- Yan Dong & John Whalley, 2009. "A Third Benefit of Joint Non-OPEC Carbon Taxes: Transferring OPEC Monopoly Rent," CESifo Working Paper Series 2741, CESifo Group Munich.
- Matthias Kalkuhl & Ottmar Edenhofer, 2010. "Prices vs. Quantities and the Intertemporal Dynamics of the Climate Rent," CESifo Working Paper Series 3044, CESifo Group Munich.
- Santiago J. Rubio, 2005. "Tariff Agreements And Non-Renewable Resource International Monopolies: Prices Versus Quantitites," Working Papers. Serie AD, Instituto Valenciano de Investigaciones EconÃ³micas, S.A. (Ivie) 2005-10, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
- Liski, Matti & Tahvonen, Olli, 2004. "Can carbon tax eat OPEC's rents?," Journal of Environmental Economics and Management, Elsevier, vol. 47(1), pages 1-12, January.
- Franz Wirl, 1995. "The exploitation of fossil fuels under the threat of global warming and carbon taxes: A dynamic game approach," Environmental & Resource Economics, European Association of Environmental and Resource Economists, European Association of Environmental and Resource Economists, vol. 5(4), pages 333-352, June.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Roula I. Yazigi).
If references are entirely missing, you can add them using this form.