IDEAS home Printed from https://ideas.repec.org/p/hhs/osloec/2012_004.html
   My bibliography  Save this paper

Second-best Climate Policy

Author

Listed:
  • Hoel, Michael

    () (Dept. of Economics, University of Oslo)

Abstract

Countries with an active climate policy often use several other policy instruments in addition to a price on carbon emissions, such as subsidies to renewable energy. An obvious reason for subsidizing alternatives to carbon energy is that the price of carbon emissions is "too low". The paper derives implications for a second-best climate policy if for some reason the price of carbon emissions is lower than the Pigovian level, and also discusses reasons policy makers might have for setting the tax rate at an ine¢ ciently low level. Even if the current tax rate is optimally set, governments cannot commit to future tax rates. In some cases this inabilty to commit may justify subsidies to investments in renewable energy.

Suggested Citation

  • Hoel, Michael, 2012. "Second-best Climate Policy," Memorandum 04/2012, Oslo University, Department of Economics.
    • Handle: RePEc:hhs:osloec:2012_004
    as

    Download full text from publisher

    File URL: https://www.sv.uio.no/econ/english/research/unpublished-works/working-papers/pdf-files/2012/Memo-04-2012.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Stern,Nicholas, 2007. "The Economics of Climate Change," Cambridge Books, Cambridge University Press, number 9780521700801.
    2. Fischer, Carolyn & Newell, Richard G., 2008. "Environmental and technology policies for climate mitigation," Journal of Environmental Economics and Management, Elsevier, vol. 55(2), pages 142-162, March.
    3. Michael Hoel, 2011. "The Supply Side of CO 2 with Country Heterogeneity," Scandinavian Journal of Economics, Wiley Blackwell, vol. 113(4), pages 846-865, December.
    4. Alistair Ulph & David Ulph, 2011. "Optimal Climate Change Policies When Governments Cannot Commit," Discussion Paper Series, School of Economics and Finance 201104, School of Economics and Finance, University of St Andrews.
    5. Michael Hoel, 2011. "The Supply Side of CO 2 with Country Heterogeneity," Scandinavian Journal of Economics, Wiley Blackwell, vol. 113(4), pages 846-865, December.
    6. Ulph, Alistair & Ulph, David, 1994. "The Optimal Time Path of a Carbon Tax," Oxford Economic Papers, Oxford University Press, vol. 46(0), pages 857-868, Supplemen.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Lecuyer, Oskar & Quirion, Philippe, 2013. "Can uncertainty justify overlapping policy instruments to mitigate emissions?," Ecological Economics, Elsevier, vol. 93(C), pages 177-191.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Nachtigall, Daniel & Rübbelke, Dirk, 2016. "The green paradox and learning-by-doing in the renewable energy sector," Resource and Energy Economics, Elsevier, vol. 43(C), pages 74-92.
    2. Benjamin Jones & Michael Keen & Jon Strand, 2013. "Fiscal implications of climate change," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 20(1), pages 29-70, February.
    3. Hendrik Ritter & Mark Schopf, 2014. "Unilateral Climate Policy: Harmful or Even Disastrous?," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 58(1), pages 155-178, May.
    4. Frederick van der Ploeg, 2013. "Cumulative Carbon Emissions and the Green Paradox," Annual Review of Resource Economics, Annual Reviews, vol. 5(1), pages 281-300, June.
    5. Hoel, Michael & Jensen, Svenn, 2012. "Cutting costs of catching carbon—Intertemporal effects under imperfect climate policy," Resource and Energy Economics, Elsevier, vol. 34(4), pages 680-695.
    6. Fischer, Carolyn & Salant, Stephen W., 2017. "Balancing the carbon budget for oil: The distributive effects of alternative policies," European Economic Review, Elsevier, vol. 99(C), pages 191-215.
    7. Mads Greaker & Michael Hoel & Knut Einar Rosendahl, 2014. "Does a Renewable Fuel Standard for Biofuels Reduce Climate Costs?," Journal of the Association of Environmental and Resource Economists, University of Chicago Press, vol. 1(3), pages 337-363.
    8. Eichner, Thomas & Pethig, Rüdiger, 2015. "Unilateral consumption-based carbon taxes and negative leakage," Resource and Energy Economics, Elsevier, vol. 40(C), pages 127-142.
    9. Coulomb, Renaud & Henriet, Fanny, 2018. "The Grey Paradox: How fossil-fuel owners can benefit from carbon taxation," Journal of Environmental Economics and Management, Elsevier, vol. 87(C), pages 206-223.
    10. Luise Röpke, 2015. "Essays on the Integration of New Energy Sources into Existing Energy Systems," ifo Beiträge zur Wirtschaftsforschung, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, number 58, December.
    11. van der Werf, Edwin & Di Maria, Corrado, 2012. "Imperfect Environmental Policy and Polluting Emissions: The Green Paradox and Beyond," International Review of Environmental and Resource Economics, now publishers, vol. 6(2), pages 153-194, March.
    12. Ngo Van Long, 2014. "The Green Paradox in Open Economies," CESifo Working Paper Series 4639, CESifo.
    13. Rickels, Wilfried & Peterson, Sonja & Felbermayr, Gabriel, 2019. "Schrittweise zu einem umfassenden europäischen Emissionshandel," Kiel Policy Brief 127, Kiel Institute for the World Economy (IfW).
    14. Mads Greaker & Michael Hoel & Knut Einar Rosendahl, 2014. "Does a Renewable Fuel Standard for Biofuels Reduce Climate Costs?," Journal of the Association of Environmental and Resource Economists, University of Chicago Press, vol. 1(3), pages 337-363.
    15. 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, December.
    16. Fischer, Carolyn & Salant, Stephen, 2012. "Alternative Climate Policies and Intertemporal Emissions Leakage: Quantifying the Green Paradox," Discussion Papers dp-12-16, Resources For the Future.
    17. Ritter, Hendrik & Runkel, Marco & Zimmermann, Karl, 2019. "Environmental Effects of Capital Income Taxation - A New Double Dividend?," EconStor Preprints 195172, ZBW - Leibniz Information Centre for Economics.
    18. Kollenbach, Gilbert, 2013. "Endogenous Growth with a Ceiling on the Stock of Pollution," MPRA Paper 50641, University Library of Munich, Germany.
    19. Hoel, Michael, 2016. "Optimal control theory with applications to resource and environmental economics," Memorandum 08/2016, Oslo University, Department of Economics.
    20. Malik Curuk & Suphi Sen, 2018. "Climate Policy and Resource Extraction with Variable Markups and Imperfect Substitute," ifo Working Paper Series 278, ifo Institute - Leibniz Institute for Economic Research at the University of Munich.

    More about this item

    Keywords

    carbon tax; subsidies; commitment;
    All these keywords.

    JEL classification:

    • Q42 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Alternative Energy Sources
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:hhs:osloec:2012_004. 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: (Mari Strønstad Øverås). General contact details of provider: https://edirc.repec.org/data/souiono.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.