Leakage, Welfare, and Cost-Effectiveness of Carbon Policy
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.
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- Kathy Baylis & Don Fullerton & Daniel H. Karney, 2013. "Leakage, Welfare, and Cost-Effectiveness of Carbon Policy," American Economic Review, American Economic Association, vol. 103(3), pages 332-337, May.
- Kathy Baylis & Don Fullerton & Daniel H. Karney, 2013. "Leakage, Welfare, and Cost-Effectiveness of Carbon Policy," NBER Working Papers 18898, National Bureau of Economic Research, Inc.
- 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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