IDEAS home Printed from https://ideas.repec.org/p/uow/depec1/wp12-09.html
   My bibliography  Save this paper

A Stock Targeting International Carbon-Tax Rule with Uncertainty and Diminishing Compliance

Author

Abstract

A rule for setting a tax on carbon emissions to limit their atmospheric stock to a predetermined level is developed for a world inhabited by uncoordinated, myopic, expected utility maximizing agents. In all locations, the mean of the marginal product of the carbon emitting input diminishes and the variance increases as climate deteriorates. The rule is illustrated for a world divided into poor countries and rich countries. The poor countries’ costs of non-compliance with the tax, in terms of per capita utility loss from diminished reputation, are negligible. The rich countries' costs of non-compliance and, consequently, inclination to pay the globally set tax can be substantial but not identical. The number of complying rich countries decreases with the tax level, but at a rate that is moderated by the range of the rich countries’ loss of per capita utility from abstinence.

Suggested Citation

  • Amnon Levy, 2012. "A Stock Targeting International Carbon-Tax Rule with Uncertainty and Diminishing Compliance," Economics Working Papers wp12-09, School of Economics, University of Wollongong, NSW, Australia.
  • Handle: RePEc:uow:depec1:wp12-09
    as

    Download full text from publisher

    File URL: http://www.uow.edu.au/content/groups/public/@web/@commerce/@smm/documents/web/uow135277.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Martin L. Weitzman, 1974. "Prices vs. Quantities," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 41(4), pages 477-491.
    2. 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.
    3. Hoel, Michael & Karp, Larry, 2002. "Taxes versus quotas for a stock pollutant," Resource and Energy Economics, Elsevier, vol. 24(4), pages 367-384, November.
    4. Pizer, William A., 2002. "Combining price and quantity controls to mitigate global climate change," Journal of Public Economics, Elsevier, vol. 85(3), pages 409-434, September.
    5. 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.
    6. 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.
    Full references (including those not matched with items on IDEAS)

    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. Amnon Levy, 2011. "Emission-Photosynthesis Imbalance and Climate Change:Forest Land under Intensified Uncertainty and Expected Utility Maximization," Economics Working Papers wp11-08, School of Economics, University of Wollongong, NSW, Australia.
    2. Heimvik, Arild & Amundsen, Eirik S., 2019. "Prices vs. percentages: Use of tradable green certificates as an instrument of greenhouse gas mitigation," Working Papers in Economics 1/19, University of Bergen, Department of Economics.
    3. Heindl, Peter & Kanschik, Philipp, 2016. "Ecological sufficiency, individual liberties, and distributive justice: Implications for policy making," Ecological Economics, Elsevier, vol. 126(C), pages 42-50.
    4. 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.
    5. Joseph E. Aldy & Alan J. Krupnick & Richard G. Newell & Ian W. H. Parry & William A. Pizer, 2010. "Designing Climate Mitigation Policy," Journal of Economic Literature, American Economic Association, vol. 48(4), pages 903-934, December.
    6. Halvor Briseid Storrøsten, 2012. "Prices vs. quantities: Technology choice, uncertainty and welfare," Discussion Papers 677, Statistics Norway, Research Department.
    7. Adrian Amelung, 2016. "Das "Paris-Agreement": Durchbruch der Top-Down-Klimaschutzverhandlungen im Kreise der Vereinten Nationen," Otto-Wolff-Institut Discussion Paper Series 03/2016, Otto-Wolff-Institut für Wirtschaftsordnung, Köln, Deutschland.
    8. Pezzey, John C.V. & Jotzo, Frank, 2010. "Tax-Versus-Trading and Free Emission Shares as Issues for Climate Policy Design," Research Reports 95049, Australian National University, Environmental Economics Research Hub.
    9. Aldy, Joseph E. & Ley, Eduardo & Parry, Ian, 2008. "A Tax–Based Approach to Slowing Global Climate Change," National Tax Journal, National Tax Association;National Tax Journal, vol. 61(3), pages 493-517, September.
    10. Doda, Baran & Quemin, Simon & Taschini, Luca, 2019. "Linking permit markets multilaterally," Journal of Environmental Economics and Management, Elsevier, vol. 98(C).
    11. Stiglitz, Joseph E., 2019. "Addressing climate change through price and non-price interventions," European Economic Review, Elsevier, vol. 119(C), pages 594-612.
    12. Fell, Harrison & MacKenzie, Ian A. & Pizer, William A., 2012. "Prices versus quantities versus bankable quantities," Resource and Energy Economics, Elsevier, vol. 34(4), pages 607-623.
    13. Galinato, Gregmar I. & Yoder, Jonathan K., 2010. "An integrated tax-subsidy policy for carbon emission reduction," Resource and Energy Economics, Elsevier, vol. 32(3), pages 310-326, August.
    14. Lawrence H. Goulder & William A. Pizer, 2006. "The Economics of Climate Change," NBER Working Papers 11923, National Bureau of Economic Research, Inc.
    15. Rohling, Moritz & Ohndorf, Markus, 2012. "Prices vs. Quantities with fiscal cushioning," Resource and Energy Economics, Elsevier, vol. 34(2), pages 169-187.
    16. Schaufele, Brandon, 2019. "Demand Shocks Change the Excess Burden From Carbon Taxes," MPRA Paper 92132, University Library of Munich, Germany.
    17. Martin L. Weitzman, 2020. "Prices or Quantities Can Dominate Banking and Borrowing," Scandinavian Journal of Economics, Wiley Blackwell, vol. 122(2), pages 437-463, April.
    18. Gilbert E. Metcalf, 2009. "Cost Containment in Climate Change Policy: Alternative Approaches to Mitigating Price Volatility," NBER Working Papers 15125, National Bureau of Economic Research, Inc.
    19. Annicchiarico, Barbara & Diluiso, Francesca, 2019. "International transmission of the business cycle and environmental policy," Resource and Energy Economics, Elsevier, vol. 58(C).
    20. Wood, Peter J. & Heindl, Peter & Jotzo, Frank & Loschel, Andreas, 2013. "Linking Price and Quantity Pollution Controls under Uncertainty," Working Papers 249404, Australian National University, Centre for Climate Economics & Policy.

    More about this item

    Keywords

    Carbon Emissions; Climate Change; Uncertainty; Tax; Compliance;
    All these keywords.

    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

    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:uow:depec1:wp12-09. See general information about how to correct material in RePEc.

    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 bibliographic 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.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Peter Siminski (email available below). General contact details of provider: https://edirc.repec.org/data/deuowau.html .

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

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.