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Leakage, Welfare, and Cost-Effectiveness of Carbon Policy

Author

Listed:
  • Kathy Baylis
  • Don Fullerton
  • Dan Karney

Abstract

We extend the model of Fullerton, Karney, and Baylis (2012 working paper) to explore cost-effectiveness of unilateral climate policy in the presence of leakage. We ignore the welfare gain from reducing greenhouse gas emissions and focus on the welfare cost of the emissions tax or permit scheme. Whereas that prior paper solves for changes in emissions quantities and finds that leakage maybe negative, we show here that all cases with negative leakage in that model are cases where a unilateral carbon tax results in a welfare loss. With positive leakage, however, a unilateral policy can improve welfare.

Suggested Citation

  • Kathy Baylis & Don Fullerton & Dan Karney, 2013. "Leakage, Welfare, and Cost-Effectiveness of Carbon Policy," CESifo Working Paper Series 4101, CESifo Group Munich.
  • Handle: RePEc:ces:ceswps:_4101
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    File URL: http://www.cesifo-group.de/DocDL/cesifo1_wp4101.pdf
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    Cited by:

    1. Perino, Grischa & Jarke, Johannes, 2015. "Do Renewable Energy Policies Reduce Carbon Emissions? On Caps and Intra-Jurisdictional Leakage," Annual Conference 2015 (Muenster): Economic Development - Theory and Policy 113007, Verein für Socialpolitik / German Economic Association.
    2. repec:cup:endeec:v:22:y:2017:i:06:p:725-746_00 is not listed on IDEAS
    3. repec:eee:eneeco:v:74:y:2018:i:c:p:535-545 is not listed on IDEAS
    4. Hans-Jürgen Nantke & Alfred Endres & Frederik Schaff & Till Requate & Susanne Dröge, 2013. "Scheitern der Reform des Emissionshandels: Verliert Europa die Vorreiterrolle in der Klimapolitik?," ifo Schnelldienst, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 66(12), pages 03-15, June.
    5. Bauer, Nico & Bosetti, Valentina & Hamdi-Cherif, Meriem & Kitous, Alban & McCollum, David & Méjean, Aurélie & Rao, Shilpa & Turton, Hal & Paroussos, Leonidas & Ashina, Shuichi & Calvin, Katherine & Wa, 2015. "CO2 emission mitigation and fossil fuel markets: Dynamic and international aspects of climate policies," Technological Forecasting and Social Change, Elsevier, vol. 90(PA), pages 243-256.
    6. López, Ramón E. & Yoon, Sang W., 2014. "Environmental Sustainability with a Pollution Tax," Working Papers 166244, University of Maryland, Department of Agricultural and Resource Economics.
    7. van der Ploeg, Frederick, 2016. "Second-best carbon taxation in the global economy: The Green Paradox and carbon leakage revisited," Journal of Environmental Economics and Management, Elsevier, vol. 78(C), pages 85-105.
    8. repec:eee:jeeman:v:84:y:2017:i:c:p:102-124 is not listed on IDEAS
    9. Zhang, Zengkai & Zhang, Zhongxiang, 2017. "Intermediate input linkage and carbon leakage," Environment and Development Economics, Cambridge University Press, vol. 22(06), pages 725-746, December.
    10. Frederick van der Ploeg, 2015. "Unilateral Carbon Taxation in the Global Economy: The Green Paradox and carbon leakage revisted," OxCarre Working Papers 157, Oxford Centre for the Analysis of Resource Rich Economies, University of Oxford.
    11. repec:eee:eneeco:v:67:y:2017:i:c:p:159-168 is not listed on IDEAS
    12. Grischa Perino, 2015. "Climate Campaigns, Cap and Trade, and Carbon Leakage: Why Trying to Reduce Your Carbon Footprint Can Harm the Climate," Journal of the Association of Environmental and Resource Economists, University of Chicago Press, vol. 2(3), pages 469-495.
    13. Bruno, Ellen & Jessoe, Katrina K., 2018. "Groundwater, Incomplete Regulation, and Climate Change: Micro-level Evidence on the Price Elasticity of Demand for Agricultural Groundwater," 2018 Annual Meeting, August 5-7, Washington, D.C. 274430, Agricultural and Applied Economics Association.
    14. Hochman, Gal & Zilberman, David, 2015. "The political economy of OPEC," Energy Economics, Elsevier, vol. 48(C), pages 203-216.
    15. repec:eee:jeeman:v:88:y:2018:i:c:p:95-113 is not listed on IDEAS
    16. Holladay, J. Scott & Mohsin, Mohammed & Pradhan, Shreekar, 2018. "Emissions leakage, environmental policy and trade frictions," Journal of Environmental Economics and Management, Elsevier, vol. 88(C), pages 95-113.

    More about this item

    Keywords

    trade and environment; pollution havens; unilateral climate policy;

    JEL classification:

    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • Q28 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Government Policy
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

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