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Negotiating a uniform emissions tax in international environmental agreements

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  • McEvoy, David M.
  • McGinty, Matthew

Abstract

A consensus appears to be emerging that a global carbon tax is the best policy for managing greenhouse gas emissions. Emissions tax systems are relatively straightforward, cost effective and can generate revenues used to offset other distortionary taxes. Moreover, recent theoretical research (Weitzman, 2014) has demonstrated that under some conditions the globally efficient tax rate can be implemented through a majority voting rule. We extend this area of research by examining a uniform emissions tax system in the framework of an international environmental agreement in which only countries that voluntarily participate are subject to the tax. We show that in the simplest situation in which countries have identical marginal benefit and cost functions, the largest stable agreement consists of two countries and the tax system has little impact on abatement levels. Our analysis highlights that by ignoring the participation decision and assuming commitment by all parties, the efficiency gains from a uniform emissions tax system are overstated.

Suggested Citation

  • McEvoy, David M. & McGinty, Matthew, 2018. "Negotiating a uniform emissions tax in international environmental agreements," Journal of Environmental Economics and Management, Elsevier, vol. 90(C), pages 217-231.
  • Handle: RePEc:eee:jeeman:v:90:y:2018:i:c:p:217-231
    DOI: 10.1016/j.jeem.2018.06.001
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    References listed on IDEAS

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    Cited by:

    1. Nkuiya, Bruno, 2020. "Stability of international environmental agreements under isoelastic utility," Resource and Energy Economics, Elsevier, vol. 59(C).
    2. Bakalova, Irina & Eyckmans, Johan, 2019. "Simulating the impact of heterogeneity on stability and effectiveness of international environmental agreements," European Journal of Operational Research, Elsevier, vol. 277(3), pages 1151-1162.

    More about this item

    Keywords

    Global public goods; Uniform emissions tax; International environmental agreements; Externalities;

    JEL classification:

    • C7 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory
    • D7 - Microeconomics - - Analysis of Collective Decision-Making
    • F5 - International Economics - - International Relations, National Security, and International Political Economy
    • H4 - Public Economics - - Publicly Provided Goods

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