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Does The Adverse Announcement Effect Of Climate Policy Matter? — A Dynamic General Equilibrium Analysis

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  • MARIE-CATHERINE RIEKHOF

    () (CER-ETH — Center of Economic, Research at ETH Zurich, Zürichbergstrasse 18, 8092 Zurich, Switzerland)

  • JOHANNES BRÖCKER

    (Department of Economics, Christian-Albrechts University, Kiel, Olshausenstrasse 40 24118 Kiel, Germany)

Abstract

We consider a carbon emissions tax announced today, but implemented after a known time-lag. Before implementation, the announcement induces higher emissions than without intervention. In welfare terms, this adverse announcement effect could more than outweigh the gain after tax implementation. We quantify a “critical lag” such that a shorter (longer) implementation lag is a welfare gain (loss) over no-intervention. We identify resource scarcity as the main driver for a short critical lag. The model is a global Ramsey Model extended by an exhaustible carbon resource and linked to a climate model.

Suggested Citation

  • Marie-Catherine Riekhof & Johannes Bröcker, 2017. "Does The Adverse Announcement Effect Of Climate Policy Matter? — A Dynamic General Equilibrium Analysis," Climate Change Economics (CCE), World Scientific Publishing Co. Pte. Ltd., vol. 8(02), pages 1-34, May.
  • Handle: RePEc:wsi:ccexxx:v:08:y:2017:i:02:n:s2010007817500075
    DOI: 10.1142/S2010007817500075
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    References listed on IDEAS

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    Cited by:

    1. Blasch, Julia & Boogen, Nina & Filippini, Massimo & Kumar, Nilkanth, 2017. "Explaining electricity demand and the role of energy and investment literacy on end-use efficiency of Swiss households," Energy Economics, Elsevier, vol. 68(S1), pages 89-102.
    2. Caurla, Sylvain & Bertrand, Vincent & Delacote, Philippe & Le Cadre, Elodie, 2018. "Heat or power: How to increase the use of energy wood at the lowest cost?," Energy Economics, Elsevier, vol. 75(C), pages 85-103.
    3. Hans Gersbach & Marie-Catherine Riekhof, 2017. "Technology Treaties and Climate Change," CER-ETH Economics working paper series 17/268, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich.
    4. Espinola-Arredondo, Ana & Muñoz-García, Félix & Duah, Isaac, 2019. "Anticipatory effects of taxation in the commons: When do taxes work, and when do they fail?," Ecological Economics, Elsevier, vol. 166(C), pages 1-1.

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