IDEAS home Printed from https://ideas.repec.org/a/bla/jpbect/v18y2016i5p709-725.html
   My bibliography  Save this article

Should the Carbon Price Be the Same in All Countries?

Author

Listed:
  • ANTOINE D'AUTUME
  • KATHELINE SCHUBERT
  • CEES WITHAGEN

Abstract

International di¤erences in fuel taxation are huge, and may be justi…ed by different local negative externalities that taxes must correct, as well as by di¤erent preferences for public spending. In this context, should a worldwide uniform carbon tax be added to these local taxes to correct the global warming externality? We address this question in a second best framework à la Ramsey, where public goods have to be …nanced through distortionary taxation and the cost of public funds has to be weighted against the utility of public goods. We show that when lump-sum transfers between countries are allowed for, the second best tax on the polluting good may be decomposed into three parts: one, country-speci…c, dealing with the local negative externality, a second one, country-speci…c, dealing with the cost of levying public funds, and a third one, global, dealing with the global externality and which can be interpreted as the carbon price. Our main contribution is to show that the uniformity of the carbon price should still hold in this second best framework. Nevertheless, if lump-sum transfers between governments are impossible to implement, international di¤erentiation of the carbon price is the only way to take care of equity concerns. keywords: carbon price, second best, Pigovian taxation
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Antoine D'Autume & Katheline Schubert & Cees Withagen, 2016. "Should the Carbon Price Be the Same in All Countries?," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 18(5), pages 709-725, October.
    • Handle: RePEc:bla:jpbect:v:18:y:2016:i:5:p:709-725
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1111/jpet.2016.18.issue-5
    Download Restriction: Access to full text is restricted to subscribers.
    ---><---

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Gauthier, Stéphane & Laroque, Guy, 2009. "Separability and public finance," Journal of Public Economics, Elsevier, vol. 93(11-12), pages 1168-1174, December.
    2. Chichilnisky, Graciela & Heal, Geoffrey, 1994. "Who should abate carbon emissions? : An international viewpoint," Economics Letters, Elsevier, vol. 44(4), pages 443-449, April.
    3. Hikaru Ogawa & David E. Wildasin, 2009. "Think Locally, Act Locally: Spillovers, Spillbacks, and Efficient Decentralized Policymaking," American Economic Review, American Economic Association, vol. 99(4), pages 1206-1217, September.
    4. Sandmo, Agnar, 2000. "The Public Economics of the Environment," OUP Catalogue, Oxford University Press, number 9780198297987.
    5. Kristen A. Sheeran, 2006. "Who Should Abate Carbon Emissions? A Note," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 35(2), pages 89-98, October.
    6. Atkinson, A. B. & Stiglitz, J. E., 1976. "The design of tax structure: Direct versus indirect taxation," Journal of Public Economics, Elsevier, vol. 6(1-2), pages 55-75.
    7. R. G. Lipsey & Kelvin Lancaster, 1956. "The General Theory of Second Best," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 24(1), pages 11-32.
    8. Shiell, Leslie, 2003. "Equity and efficiency in international markets for pollution permits," Journal of Environmental Economics and Management, Elsevier, vol. 46(1), pages 38-51, July.
    Full references (including those not matched with items on IDEAS)

    Citations

    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. Differentiated carbon taxation
      by Economic Logician in Economic Logic on 2012-01-13 22:24:00

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Gadea Rivas, Marta Dolores & Gonzalo, Jesús, 2022. "Climate change heterogeneity: a new quantitative approach," UC3M Working papers. Economics 35442, Universidad Carlos III de Madrid. Departamento de Economía.
    2. Gerard Meijden & Frederick Ploeg & Cees Withagen, 2017. "Frontiers of Climate Change Economics," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 68(1), pages 1-14, September.
    3. Hillebrand, Elmar & Hillebrand, Marten, 2019. "Optimal climate policies in a dynamic multi-country equilibrium model," Journal of Economic Theory, Elsevier, vol. 179(C), pages 200-239.
    4. Borissov, Kirill & Bretschger, Lucas, 2022. "Optimal carbon policies in a dynamic heterogeneous world," European Economic Review, Elsevier, vol. 148(C).
    5. Roolfs, Christina & Gaitan, Beatriz & Edenhofer, Ottmar, 2021. "Make or brake — Rich states in voluntary federal emission pricing," Journal of Environmental Economics and Management, Elsevier, vol. 109(C).
    6. Brock, W. & Xepapadeas, A., 2017. "Climate change policy under polar amplification," European Economic Review, Elsevier, vol. 99(C), pages 93-112.
    7. Louis-Gaëtan Giraudet & Céline Guivarch, 2016. "Global warming as an asymmetric public bad," Working Papers 2016.26, FAERE - French Association of Environmental and Resource Economists.
    8. Lint Barrage, 2020. "Optimal Dynamic Carbon Taxes in a Climate–Economy Model with Distortionary Fiscal Policy," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 87(1), pages 1-39.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Marc Fleurbaey & Ulrike Kornek, 2021. "When redistribution makes personalized pricing of externalities useless," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 23(2), pages 363-375, April.
    2. Jacobs, Bas & de Mooij, Ruud A., 2015. "Pigou meets Mirrlees: On the irrelevance of tax distortions for the second-best Pigouvian tax," Journal of Environmental Economics and Management, Elsevier, vol. 71(C), pages 90-108.
    3. Anthoff, David, 2009. "Optimal Global Dynamic Carbon Taxation," Papers WP278, Economic and Social Research Institute (ESRI).
    4. L.F.M. Groot & J. Swart, 2015. "From Nash to Lindahl in Climate Change Policy," Working Papers 15-01, Utrecht School of Economics.
    5. Pawel Doligalski & Piotr Dworczak & Joanna Krysta, 2023. "Incentive separability," Bristol Economics Discussion Papers 23/777, School of Economics, University of Bristol, UK.
    6. Vidar Christiansen & Stephen Smith, 2009. "Externality-correcting Taxes and Regulation," CESifo Working Paper Series 2793, CESifo.
    7. Jakob, Michael, 2021. "Climate policy and international trade – A critical appraisal of the literature," Energy Policy, Elsevier, vol. 156(C).
    8. Richter, Wolfram F., 2009. "Taxing education in Ramsey's tradition," Journal of Public Economics, Elsevier, vol. 93(11-12), pages 1254-1260, December.
    9. repec:zbw:rwirep:0140 is not listed on IDEAS
    10. Agnar Sandmo, 2003. "Environmental Taxation and Revenue for Development," WIDER Working Paper Series DP2003-86, World Institute for Development Economic Research (UNU-WIDER).
    11. Sanz Labrador, Ismael & Sanz-Sanz, José Félix, 2013. "Política fiscal y crecimiento económico: consideraciones microeconómicas y relaciones macroeconómicas," Macroeconomía del Desarrollo 5367, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL).
    12. Bonnet, Odran & Chapelle, Guillaume & Trannoy, Alain & Wasmer, Etienne, 2021. "Land is back, it should be taxed, it can be taxed," European Economic Review, Elsevier, vol. 134(C).
    13. Odran Bonnet & Guillaume Flamerie de La Chapelle & Alain Trannoy & Etienne Wasmer, 2019. "Secular Trends in Wealth and Heterogeneous Capital: Land is Back... and Should Be Taxed," Working Papers hal-03570837, HAL.
    14. Rafael Aigner, 2014. "Environmental Taxation and Redistribution Concerns," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 70(2), pages 249-277, June.
    15. Gregor Schwerhoff & Ottmar Edenhofer, 2014. "The Globalization Paradox Revisited," CESifo Working Paper Series 4878, CESifo.
    16. Kverndokk, Snorre & Rose, Adam, 2008. "Equity and Justice in Global Warming Policy," International Review of Environmental and Resource Economics, now publishers, vol. 2(2), pages 135-176, October.
    17. Bas Jacobs, 2010. "The Marginal Cost of Public Funds is One," CESifo Working Paper Series 3250, CESifo.
    18. Stiglitz, Joseph E., 2018. "Pareto efficient taxation and expenditures: Pre- and re-distribution," Journal of Public Economics, Elsevier, vol. 162(C), pages 101-119.
    19. Franck Lecocq & Jean-Charles Hourcade, 2016. "Unspoken Ethical Issues in the Climate Affair: Insights from a Theoretical Analysis of Negotiation Mandates," Studies in Economic Theory, in: Graciela Chichilnisky & Armon Rezai (ed.), The Economics of the Global Environment, pages 311-340, Springer.
    20. Cappelen, Alexander W. & Cappelen, Cornelius & Tungodden, Bertil, 2018. "Second-best fairness under Limited information: The trade-off between false positives and false negatives," Discussion Paper Series in Economics 18/2018, Norwegian School of Economics, Department of Economics.
    21. Stéphane Gauthier & Fanny Henriet, 2016. "Consumption taxes and taste heterogeneity," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-01252563, HAL.

    More about this item

    Keywords

    carbon price; second best; pigovian taxation
    (this abstract was borrowed from another version of this item.)    ;
    All these keywords.

    JEL classification:

    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • H41 - Public Economics - - Publicly Provided Goods - - - Public Goods
    • H71 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Taxation, Subsidies, and Revenue
    • H87 - Public Economics - - Miscellaneous Issues - - - International Fiscal Issues; International Public Goods
    • Q5 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bla:jpbect:v:18:y:2016:i:5:p:709-725. See general information about how to correct material in RePEc.

    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 CitEc recognized a bibliographic reference but did not link an item in RePEc 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 RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: https://edirc.repec.org/data/apettea.html .

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

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.