Should the carbon price be the same in all countries ?
International differences in fuel taxation are huge, and may be justified by different local negative externalities that taxes must correct, as well as by different preferences for public spending. In this context, should a worldwide unique carbon tax be added to these local taxes to correct the global warming externality ? We address this question in a second best framework à la Ramsey, where public goods have to be financed through distortionary taxation and the cost of public funds has to be weighted against the utility of public goods. We show that when lump-sum transfers between countries are allowed for, the second best tax on the polluting good may be decomposed into three parts : one, country specific, dealing with the local negative externality, a second one, country specific, dealing with the cost of public funds, and a third one, global, dealing with the global externality and which can be interpreted as the carbon price. Our main contribution is to show that the uniqueness of the carbon price should still hold in this second best framework. Nevertheless, if lump-sum transfers between governments are impossible to implement, international differentiation of the carbon price is the only way to take care of equity concerns.
|Date of creation:||Aug 2011|
|Date of revision:|
|Note:||View the original document on HAL open archive server: http://halshs.archives-ouvertes.fr/halshs-00654239|
|Contact details of provider:|| Web page: http://hal.archives-ouvertes.fr/|
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.:
- Stéphane Gauthier & Guy Laroque, 2008.
"Separability and public finance,"
IFS Working Papers
W08/07, Institute for Fiscal Studies.
- Hikaru Ogawa & David E. Wildasin, 2009.
"Think Locally, Act Locally: Spillovers, Spillbacks, and Efficient Decentralized Policymaking,"
American Economic Review,
American Economic Association, vol. 99(4), pages 1206-17, September.
- Hikaru Ogawa & David Wildasin, 2007. "Think Locally, Act Locally: Spillovers, Spillbacks, and Efficient Decentralized Policymaking," Working Papers 2007-06, University of Kentucky, Institute for Federalism and Intergovernmental Relations.
- Hikaru Ogawa & David E. Wildasin, 2007. "Think Locally, Act Locally: Spillovers, Spillbacks, and Efficient Decentralized Policymaking," CESifo Working Paper Series 2142, CESifo Group Munich.
- Graciela Chichilnisky & Geoffrey Heal, 1993.
"Who Should Abate Carbon Emissions? An International Viewpoint,"
NBER Working Papers
4425, National Bureau of Economic Research, Inc.
- Chichilnisky, Graciela & Heal, Geoffrey, 1994. "Who should abate carbon emissions? : An international viewpoint," Economics Letters, Elsevier, vol. 44(4), pages 443-449, April.
- Atkinson, A. B. & Stiglitz, J. E., 1976. "The design of tax structure: Direct versus indirect taxation," Journal of Public Economics, Elsevier, vol. 6(1-2), pages 55-75.
- Kristen A. Sheeran, 2006. "Who Should Abate Carbon Emissions? A Note," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 35(2), pages 89-98, October.
When requesting a correction, please mention this item's handle: RePEc:hal:cesptp:halshs-00654239. 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: (CCSD)
If references are entirely missing, you can add them using this form.