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Can a Small Nation Gain from Introducing a Carbon Tax Early?

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  • Lund, Diderik

Abstract

Carbon dioxide emissions may cause global warming. But own emissions have negligible effects for a small nation, which may thus regard carbon taxes as distortionary. Such taxes may have other effects, however. When research and development (R&D) has positive external effects, carbon taxes may correct for some of these, by giving incentives for R&D in particular directions. This may be beneficial when the nation faces a binding international agreement on reducing emissions in a future period. This effect is analysed, both for a case with a carbon tax alone, and for two different cases with R&D subsidies as well. Finally, a different international agreement is considered, under which the tax revenue is collected domestically.

Suggested Citation

  • Lund, Diderik, 1994. "Can a Small Nation Gain from Introducing a Carbon Tax Early?," CEPR Discussion Papers 1064, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:1064
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    Keywords

    Carbon Tax; Global Warming; Research and Development;

    JEL classification:

    • Q25 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Water
    • Q32 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Exhaustible Resources and Economic Development

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