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Carbon tax and OPEC's rents under a ceiling constraint

Author

Listed:
  • Rémy Dullieux

    (CES - Centre d'économie de la Sorbonne - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique)

  • Lionel Ragot

    (EPEE - Centre d'Etudes des Politiques Economiques - UEVE - Université d'Évry-Val-d'Essonne)

  • Katheline Schubert

    (CES - Centre d'économie de la Sorbonne - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique, PSE - Paris School of Economics - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris sciences et lettres - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement)

Abstract

We study the Markov-perfect Nash equilibrium (MPNE) of a game between oil-importing countries, who seek to maintain the atmospheric carbon concentration under a given ceiling, and oil-exporting countries. The oil-importing countries set a carbon tax and the oil-exporting countries control the producer price. We obtain implicit feedback rules and explicit non-linear time paths of extraction, carbon tax, and producer price. Consumers are always able to reap some share of the scarcity and monopoly rents, whereas producers partially pre-empt the carbon tax only if the marginal damage under the ceiling is small. We compare the MPNE to the efficient, open-loop, and cartel-without-tax equilibria.

Suggested Citation

  • Rémy Dullieux & Lionel Ragot & Katheline Schubert, 2011. "Carbon tax and OPEC's rents under a ceiling constraint," PSE-Ecole d'économie de Paris (Postprint) halshs-00976591, HAL.
    • Handle: RePEc:hal:pseptp:halshs-00976591
    DOI: 10.1111/j.1467-9442.2011.01678.x
    Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-00976591
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    References listed on IDEAS

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    1. Wirl, Franz, 2012. "Global warming: Prices versus quantities from a strategic point of view," Journal of Environmental Economics and Management, Elsevier, vol. 64(2), pages 217-229.
    2. Habermacher, Florian & Kirchgässner, Gebhard, 2011. "Climate Effects of Carbon Taxes, Taking into Account Possible Other Future Climate Measures," Economics Working Paper Series 1110, University of St. Gallen, School of Economics and Political Science, revised Feb 2014.
    3. Armon Rezai & Frederick van der Ploeg & Cees Withagen, 2020. "Economic growth and the social cost of carbon: additive versus multiplicative damages," Chapters, in: Graciela Chichilnisky & Armon Rezai (ed.), Handbook on the Economics of Climate Change, chapter 9, pages 199-223, Edward Elgar Publishing.
    4. Armon Rezai & Frederick van der Ploeg & Cees Withagen, 2012. "The Optimal Carbon Tax and Economic Growth: Additive versus Multiplicative Damages," CEEES Paper Series CE3S-05/12, European University at St. Petersburg, Department of Economics.
    5. Christian Beermann, 2015. "Climate Policy and the Intertemporal Supply of Fossil Resources," ifo Beiträge zur Wirtschaftsforschung, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, number 62.
    6. Thomas Eichner & Gilbert Kollenbach & Mark Schopf, 2023. "Demand- Versus Supply-Side Climate Policies with a Carbon Dioxide Ceiling," The Economic Journal, Royal Economic Society, vol. 133(652), pages 1371-1406.
    7. Elkhan Richard Sadik-Zada & Wilhelm Loewenstein, 2020. "Drivers of CO 2 -Emissions in Fossil Fuel Abundant Settings: (Pooled) Mean Group and Nonparametric Panel Analyses," Energies, MDPI, vol. 13(15), pages 1-24, August.
    8. Christoph Bohringer, Knut Einar Rosendahl, and Jan Schneider, 2014. "Unilateral Climate Policy: Can OPEC Resolve the Leakage Problem?," The Energy Journal, International Association for Energy Economics, vol. 0(Number 4).
    9. Peszko,Grzegorz & Van Der Mensbrugghe,Dominique & Golub,Alexander Alexandrovich, 2020. "Diversification and Cooperation Strategies in a Decarbonizing World," Policy Research Working Paper Series 9315, The World Bank.

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