Carbon taxes, the greenhouse effect, and developing countries
The authors evaluate the case for carbon taxes in terms of national interests. They reach the following conclusions. (A) A global carbon tax involves issues of international resource transfers and would be difficult to administer and enforce. It is thus unlikely to be implemented in the near future. (b) National carbon taxes can raise significant revenues cost-effectively in developing countries and are not likely to be as regressive in their impact as commonly perceived. Such taxes can also enhance economic efficiency if introduced as a revenue-neutral partial replacement for corporate income taxes or in cases where subsidies are prevalent. The welfare costs of carbon taxes generally vary directly with the existing level of energy taxes, so a carbon tax should be an instrument of choice for countries such as India and Indonesia, which have few or no energy taxes. A carbon tax can significantly reduce local pollution and carbon dioxide emissions. Cost-benefit analysis shows countries with few or no energy taxes substantially gaining from carbon taxes in terms of an improved local environment. A carbon tax of $10 a ton produces very small output losses for Pakistani industries analyzed in this paper, and the output losses are fully offset by health benefits from reduced emissions of local pollutants - even ignoring the global implications of a reduced greenhouse effect. Tradable permits are preferable to carbon taxes where the critical threshold of the stock of carbon emission beyond which temperatures would rise exponentially is known. Given our current ignorance on the costs of reducing carbon emissions and the threshold effect, a carbon tax appears to be a better and more flexible instrument for avoiding large unexpected costs.
|Date of creation:||2008|
|Date of revision:|
|Publication status:||Published in Annals of Economics and Finance, May 2014, pages 189-248|
|Contact details of provider:|| Web page: http://cema.cufe.edu.cn/|
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Shah, Anwar & Whalley, John, 1991. "Tax Incidence Analysis of Developing Countries: An Alternative View," World Bank Economic Review, World Bank Group, vol. 5(3), pages 535-52, September.
- Hoel, M., 1990.
"Efficient International Agreements For Reducing Emissions Of Co2,"
06/1990, Oslo University, Department of Economics.
- Michael Hoel, 1991. "Efficient International Agreements for Reducing Emissions of CO2," The Energy Journal, International Association for Energy Economics, vol. 0(Number 2), pages 93-108.
- Willig, Robert D, 1976. "Consumer's Surplus without Apology," American Economic Review, American Economic Association, vol. 66(4), pages 589-97, September.
- P.J. Romilly, 1991. "Global Warming and the Car," Journal of Interdisciplinary Economics, , vol. 4(1), pages 91-100, January.
- Pindyck, Robert S, 1979. "Interfuel Substitution and the Industrial Demand for Energy: An International Comparison," The Review of Economics and Statistics, MIT Press, vol. 61(2), pages 169-79, May.
- Martin Feldstein, 1978.
"The Welfare Cost of Capital Income Taxation,"
in: Research in Taxation, pages 29-51
National Bureau of Economic Research, Inc.
- Burgess, Joanne C., 1990. "The contribution of efficient energy pricing to reducing carbon dioxide emissions," Energy Policy, Elsevier, vol. 18(5), pages 449-455, June.
- Ballard, Charles L., 1990. "Marginal welfare cost calculations : Differential analysis vs. balanced-budget analysis," Journal of Public Economics, Elsevier, vol. 41(2), pages 263-276, March.
- Pearce, David W, 1991. "The Role of Carbon Taxes in Adjusting to Global Warming," Economic Journal, Royal Economic Society, vol. 101(407), pages 938-48, July.
- Browning, Edgar K, 1987. "On the Marginal Welfare Cost of Taxation," American Economic Review, American Economic Association, vol. 77(1), pages 11-23, March.
- Goulder Lawrence H., 1995. "Effects of Carbon Taxes in an Economy with Prior Tax Distortions: An Intertemporal General Equilibrium Analysis," Journal of Environmental Economics and Management, Elsevier, vol. 29(3), pages 271-297, November.
- James M. Poterba, 1991. "Tax Policy to Combat Global Warming: On Designing a Carbon Tax," NBER Working Papers 3649, National Bureau of Economic Research, Inc.
- Green, Jerry R. & Sheshinski, Eytan, 1979. "Approximating the efficiency gain of tax reforms," Journal of Public Economics, Elsevier, vol. 11(2), pages 179-195, March.
- Uri, Noel D., 1979. "Energy demand and interfuel substitution in India," European Economic Review, Elsevier, vol. 12(2), pages 181-190, April.
- William D. Nordhaus, 1991. "The Cost of Slowing Climate Change: a Survey," The Energy Journal, International Association for Energy Economics, vol. 0(Number 1), pages 37-66.
- Thomas Sterner, 1989. "Oil Products in Latin America: The Politics of Energy Pricing," The Energy Journal, International Association for Energy Economics, vol. 0(Number 2), pages 25-46.
- Alan S. Manne & Richard G. Richels, 1991. "Global CO2 Emission Reductions - the Impacts of Rising Energy Costs," The Energy Journal, International Association for Energy Economics, vol. 0(Number 1), pages 87-108.
- Summers, Lawrence H., 1991. "The Case for Corrective Taxation," National Tax Journal, National Tax Association, vol. 44(3), pages 289-92, September.
- Bernstein, Jeffrey I., 1994. "Taxes, incentives and production: The case of Turkey," Journal of Development Economics, Elsevier, vol. 45(1), pages 55-79, October.
When requesting a correction, please mention this item's handle: RePEc:cuf:wpaper:583. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Qiang Gao)
If references are entirely missing, you can add them using this form.