Optimal Emission Pricing in the Presence of International Spillovers: Decomposing Leakage and Terms-of-Trade Motives
Carbon leakage provides an efficiency argument for unilateral climate policy to differentiate emission prices in favor of emission-intensive and trade-exposed sectors. At the same time, differential emission pricing can be (mis-)used as a beggar-thy-neighbor policy to exploit terms of trade. Using an optimal tax framework, we propose a method to decompose the leakage motive and the terms-of-trade motive for emission price differentiation. We employ our method for a quantitative impact assessment of unilateral climate policy based on empirical data. We find that the leakage motive yields only small efficiency gains compared to uniform emission pricing. Likewise, the terms-of-trade motive has rather limited potential for strategic burden shifting. We conclude that the simple first-best rule of uniform emission pricing remains a practical guideline for unilateral climate policy design.
|Date of creation:||Jun 2012|
|Date of revision:||Jun 2012|
|Publication status:||Published in Oldenburg Working Papers V-347-12|
|Contact details of provider:|| Postal: 26111 Oldenburg|
Phone: +49 441 798-4107
Fax: +49 441 798-4116
Web page: http://www.vwl.uni-oldenburg.de/
More information through EDIRC
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.:
- Christoph Böhringer & Thomas Rutherford, 2002. "Carbon Abatement and International Spillovers," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 22(3), pages 391-417, July.
- Hoel, Michael, 1996.
"Should a carbon tax be differentiated across sectors?,"
Journal of Public Economics,
Elsevier, vol. 59(1), pages 17-32, January.
- Hoel, Michael, 1994. "Should a Carbon Tax be Differentiated Across Sectors?," CEPR Discussion Papers 1066, C.E.P.R. Discussion Papers.
- Hoel, M., 1993. "Should a Carbon Tax Be Differentiated Across Sectors?," Memorandum 09/1993, Oslo University, Department of Economics.
- Christoph Böhringer & Thomas F. Rutherford, 2010. "The Costs of Compliance: A CGE Assessment of Canada's Policy Options under the Kyoto Protocol," The World Economy, Wiley Blackwell, vol. 33(2), pages 177-211, 02.
- Krutilla, Kerry, 1991. "Environmental regulation in an open economy," Journal of Environmental Economics and Management, Elsevier, vol. 20(2), pages 127-142, March.
- Graham, Paul & Thorpe, Sally & Hogan, Lindsay, 1999. "Non-competitive market behaviour in the international coking coal market," Energy Economics, Elsevier, vol. 21(3), pages 195-212, June.
- Guro Børnes Ringlund & Knut Einar Rosendahl & Terje Skjerpen, 2004.
"Does oilrig activity react to oil price changes? An empirical investigation,"
372, Statistics Norway, Research Department.
- Ringlund, Guro Bornes & Rosendahl, Knut Einar & Skjerpen, Terje, 2008. "Does oilrig activity react to oil price changes An empirical investigation," Energy Economics, Elsevier, vol. 30(2), pages 371-396, March.
- Azusa OKAGAWA & Kanemi BAN, 2008. "Estimation of substitution elasticities for CGE models," Discussion Papers in Economics and Business 08-16, Osaka University, Graduate School of Economics and Osaka School of International Public Policy (OSIPP).
- Krichene, Noureddine, 2002. "World crude oil and natural gas: a demand and supply model," Energy Economics, Elsevier, vol. 24(6), pages 557-576, November.
- Alm, James, 1996. "What Is an "Optimal'"Tax System?," National Tax Journal, National Tax Association, vol. 49(1), pages 117-33, March.
- Hoel, M., 1989.
"Global Environmental Problems: The Effects Of Unilateral Actions Taken By One Country,"
11/1989, Oslo University, Department of Economics.
- Hoel, Michael, 1991. "Global environmental problems: The effects of unilateral actions taken by one country," Journal of Environmental Economics and Management, Elsevier, vol. 20(1), pages 55-70, January.
- Bohringer, Christoph & Rutherford, Thomas F., 1997. "Carbon Taxes with Exemptions in an Open Economy: A General Equilibrium Analysis of the German Tax Initiative," Journal of Environmental Economics and Management, Elsevier, vol. 32(2), pages 189-203, February.
- Böhringer, Christoph & Rutherford, Thomas F. & Tol, Richard S. J., 2009. "The EU 20/20/2020 Targets: An Overview of the EMF22 Assessment," Papers WP325, Economic and Social Research Institute (ESRI).
- Markusen, James R., 1975. "International externalities and optimal tax structures," Journal of International Economics, Elsevier, vol. 5(1), pages 15-29, February.
- Böhringer, Christoph & Balistreri, Edward J. & Rutherford, Thomas F., 2012. "The role of border carbon adjustment in unilateral climate policy: Overview of an Energy Modeling Forum study (EMF 29)," Energy Economics, Elsevier, vol. 34(S2), pages S97-S110.
When requesting a correction, please mention this item's handle: RePEc:old:dpaper:347. 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: (Catharina Schramm)
If references are entirely missing, you can add them using this form.