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Carbon tax under the Clean Development Mechanism: a unique approach for reducing greenhouse gas emissions in developing countries

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  • GOVINDA R. TIMILSINA

Abstract

This study examines the economic and environmental implications of a unique Clean Development Mechanism (CDM) scheme in which a non-Annex B country (Thailand) introduces a carbon tax and exports the resulting emission mitigation as certified emission reductions (CERs). A general equilibrium model for Thailand has been developed for analysing this carbon tax-cum-CDM (CT-CDM) policy. The study finds that, unlike a carbon tax policy, the CT-CDM policy could increase economic welfare in Thailand, depending on CER price and schemes of recycling carbon tax- and CERrevenue to the economy. The CT-CDM policy is found to increase economic welfare at a very low CER price (>US$2/tCO 2 ) if the revenue from the carbon tax and CER exports is recycled to finance cuts in existing indirect taxes on nonenergy goods. The policy would also improve economic welfare when the revenue is recycled to households through a lump-sum transfer or when it is used to finance cuts in existing labour tax, but only at a relatively high CER price (i.e. >US$55/tCO 2 ).

Suggested Citation

  • Govinda R. Timilsina, 2009. "Carbon tax under the Clean Development Mechanism: a unique approach for reducing greenhouse gas emissions in developing countries," Climate Policy, Taylor & Francis Journals, vol. 9(2), pages 139-154, January.
    • Handle: RePEc:taf:tcpoxx:v:9:y:2009:i:2:p:139-154
    DOI: 10.3763/cpol.2008.0546
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    1. ZhongXiang Zhang, 1998. "The Economics of Energy Policy in China," Books, Edward Elgar Publishing, number 1291.
    2. Charles L. Ballard & Don Fullerton & John B. Shoven & John Whalley, 1985. "Introduction to "A General Equilibrium Model for Tax Policy Evaluation"," NBER Chapters, in: A General Equilibrium Model for Tax Policy Evaluation, pages 1-5, National Bureau of Economic Research, Inc.
    3. Ballard, Charles L. & Fullerton, Don & Shoven, John B. & Whalley, John, 2009. "A General Equilibrium Model for Tax Policy Evaluation," National Bureau of Economic Research Books, University of Chicago Press, number 9780226036335.
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    1. Chen, Y.-H. Henry & Timilsina, Govinda R., 2012. "Economic implications of reducing carbon emissions from energy use and industrial processes in Brazil," Policy Research Working Paper Series 6135, The World Bank.
    2. Pauline Lacour & Jean-Christophe Simon, 2011. "Developing economies in the current climate regime : new prospects for resilience and sustainability ? The case of CDM projects in Asia," Post-Print halshs-00676809, HAL.
    3. Dinan Li & Yuge Huang & Chengzhou Guo & Haitao Wang & Jianwei Jia & Lu Huang, 2023. "Low-Carbon Optimization Design for Low-Temperature Granary Roof Insulation in Different Ecological Grain Storage Zones in China," Sustainability, MDPI, vol. 15(18), pages 1-19, September.
    4. Christoph Böhringer & Thomas Rutherford & Marco Springmann, 2015. "Erratum to: Clean-Development Investments: An Incentive-Compatible CGE Modelling Framework," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 60(4), pages 653-653, April.
    5. Xiangsheng Dou & Huanying Cui, 2017. "Low-carbon society creation and socio-economic structural transition in China," Environment, Development and Sustainability: A Multidisciplinary Approach to the Theory and Practice of Sustainable Development, Springer, vol. 19(5), pages 1577-1599, October.
    6. Pauline Lacour & Jean-Christophe Simon, 2012. "Quelle intégration des pays en développement dans le régime climatique ? Le Mécanisme pour un Développement Propre en Asie," Post-Print halshs-00763231, HAL.
    7. Bortoletto, Wagner Wilson & Pacagnella Junior, Antonio Carlos & Cabello, Otavio Gomes, 2023. "Exploring the scientific literature on clean development mechanisms: A bibliometric analysis," Energy Policy, Elsevier, vol. 183(C).
    8. Wang, Tao & Foliente, Greg & Song, Xinyi & Xue, Jiawei & Fang, Dongping, 2014. "Implications and future direction of greenhouse gas emission mitigation policies in the building sector of China," Renewable and Sustainable Energy Reviews, Elsevier, vol. 31(C), pages 520-530.

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