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Introduction to the Economics of Atmospheric Carbon-Dioxide Control



The objective of this paper is to provide an introduction to the economics of controlling the stock of carbon-dioxide in the atmosphere. The paper starts with a brief summary of the arguments against a wait-and-see strategy and in favour of controlling carbon emissions. It then provides a basic analysis of the effect of carbon tax on net-cash flow maximising agents’ emissions and offers two possible ways for setting the tax rate. The first one computes an atmospheric carbon-dioxide stock-targeting tax rate with abstinence of some agents, whereas the second considers universal cooperation and computes a welfare-maximising carbon-tax rate. While these computations assume a fixed rate of depletion of the atmospheric stock of carbon dioxide, the last section takes the depletion rate to be dependent on the distribution of the usable land between plants and humans and the change in the usable land to be dependent on the change in the atmospheric carbon-dioxide stock. The usable land allocation required for achieving a target stock of atmospheric carbon dioxide is subsequently computed.

Suggested Citation

  • Amnon Levy, 2011. "Introduction to the Economics of Atmospheric Carbon-Dioxide Control," Economics Working Papers wp11-07, School of Economics, University of Wollongong, NSW, Australia.
  • Handle: RePEc:uow:depec1:wp11-07

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    References listed on IDEAS

    1. Amnon Levy, 2011. "Abstinence with Reputation Loss, Understating Expectations and Guiltand the Effectiveness of Emission Tax," Economics Working Papers wp11-01, School of Economics, University of Wollongong, NSW, Australia.
    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. Newell, Richard G. & Pizer, William A., 2003. "Regulating stock externalities under uncertainty," Journal of Environmental Economics and Management, Elsevier, vol. 45(2, Supple), pages 416-432, March.
    4. Hoel, Michael & Karp, Larry, 2002. "Taxes versus quotas for a stock pollutant," Resource and Energy Economics, Elsevier, vol. 24(4), pages 367-384, November.
    5. repec:hrv:faseco:34728611 is not listed on IDEAS
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    More about this item


    Emissions; Carbon-Cycle Imbalance; Atmospheric Carbon Stock; Global Warming; Usable land: Control Measures; Carbon Tax; Plants-Humans Land Allocation;

    JEL classification:

    • Q52 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Pollution Control Adoption and Costs; Distributional Effects; Employment Effects
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming

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