A Carbon Tax Credit Policy in the Presence of Technological Spillovers
We model an environmental policy problem with two representative firms in two countries (one for each country). Firms are subject to environmental taxation, aimed at reducing CO2 emissions, and a unilateral technological spillover takes place: one of the two countries (innovating country) is responsible for generating the technological spillover while the other country is the one benefiting from the spillover e¤ect. Two different scenarios are analysed: one where countries do not cooperate and one where a single supranational authority is in charge of setting environmental policy. At first, both countries feature emissions taxation aimed at reducing CO2 emissions. In such a case, we show that the standard international externality applies, i.e. a suboptimal emission tax rate is set, leading to larger than efficient pollution. However, the tax rate is larger than marginal national damages in the innovating country due to the need to provide incentives towards technical change. Then we present a setting where the two countries are both subject to a national tax on emissions but the innovating country introduces a tax credit which is directly proportional to the innovative effort. In such a setting, we obtain counterintuitive results: interestingly, for a sufficiently large spillover, the tax rate in the non cooperative setting might exceed the one arising under cooperation.
|Date of creation:||21 May 2012|
|Date of revision:||21 May 2012|
|Contact details of provider:|| Postal: CEIS - Centre for Economic and International Studies - Faculty of Economics - University of Rome "Tor Vergata" - Via Columbia, 2 00133 Roma|
Web page: http://www.ceistorvergata.it
More information through EDIRC
|Order Information:|| Postal: CEIS - Centre for Economic and International Studies - Faculty of Economics - University of Rome "Tor Vergata" - Via Columbia, 2 00133 Roma|
Web: http://www.ceistorvergata.it Email:
When requesting a correction, please mention this item's handle: RePEc:rtv:ceisrp:237. 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: (Barbara Piazzi)
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 references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link 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 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.