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Global Warming Policy in a Federation

Author

Listed:
  • Robin Boadway
  • Katherine Cuff

Abstract

We explore the efficiency of alternate allocations of responsibility for greenhouse gas emissions pricing policies in a small open economy federation. Emissions result from consumption and production of a tradeable dirty good, and their intensity depends on the emissions technology. National emissions have an imperceptible effect on global warming, so preferences for control are based on social norms which can differ depending on the allocation of policy responsibility. Policies include emissions taxes and permit trading systems. The costs of collecting emission taxes and administering a permit trading system are lower for the regional governments that the federal government because of informational advantages. Unlike the regions, the federal government internalizes the social costs of emissions borne by both regions. Both federal and regional optimal emission pricing policies are variants of Pigovian taxes. When regional governments are responsible for emissions policy and the federal government makes interregional income transfers, the timing of government decisions affects policies.

Suggested Citation

  • Robin Boadway & Katherine Cuff, 2025. "Global Warming Policy in a Federation," CESifo Working Paper Series 12048, CESifo.
    • Handle: RePEc:ces:ceswps:_12048
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    References listed on IDEAS

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    1. Robin Boadway & Katherine Cuff, 2017. "The impressive contribution of Canadian economists to fiscal federalism theory and policy," Canadian Journal of Economics, Canadian Economics Association, vol. 50(5), pages 1348-1380, December.
    2. Sinn, Hans-Werner, 2012. "The Green Paradox: A Supply-Side Approach to Global Warming," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262016680, December.
    3. Caplan, Arthur J. & Cornes, Richard C. & Silva, Emilson C. D., 2000. "Pure public goods and income redistribution in a federation with decentralized leadership and imperfect labor mobility," Journal of Public Economics, Elsevier, vol. 77(2), pages 265-284, August.
    4. Diamond, Peter, 2006. "Optimal tax treatment of private contributions for public goods with and without warm glow preferences," Journal of Public Economics, Elsevier, vol. 90(4-5), pages 897-919, May.
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    Keywords

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    JEL classification:

    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • H7 - Public Economics - - State and Local Government; Intergovernmental Relations
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

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