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CO 2 -stabilization may be a ‘no-regrets’ policy

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  • Lars Håkonsen
  • Lars Mathiesen

Abstract

Restricting CO 2 emissions requires changing today's consumption pattern away from energy and emission intensive commodities towards cleaner goods. The cost of stabilizing CO 2 emissions at the 1990 level by the year 2000, say, as compared to a business-as-usual trend, is estimated by several researchers to be on the order of 1% of GNP. We will argue that the cost may be overestimated because of a too simple model describing the working of the economic system and the evaluation of welfare. We demonstrate that by expanding a model to include the actual tax system and negative externalities, the cost to present generations from restricting emissions by a CO 2 tax may be negative. That is, some reduction may actually correspond to a ‘no-regrets’ policy. The reasons are inefficiencies in today's tax system and non-optimal handling of negative externalities. Our analysis suggests that a CO 2 tax and reduced emissions will lessen such inefficiencies. Copyright Kluwer Academic Publishers 1997

Suggested Citation

  • Lars Håkonsen & Lars Mathiesen, 1997. "CO 2 -stabilization may be a ‘no-regrets’ policy," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 9(2), pages 171-198, March.
  • Handle: RePEc:kap:enreec:v:9:y:1997:i:2:p:171-198
    DOI: 10.1007/BF02441377
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    References listed on IDEAS

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