• Energy Research
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Abstract In the presence of intersectoral linkages, sector-specific carbon tax changes can have complex general equilibrium effects. In particular, a carbon tax on the emissions of a sector can lead to an increase in aggregate emissions. We analytically characterise how incremental taxes on the emissions of any set of sectors affect aggregate emissions. We show that carbon tax reforms that target sectors based on their position in the production network can achieve a greater reduction in aggregate emissions than reforms that target sectors based on their direct emissions alone. We illustrate the effects of carbon tax reforms by calibrating our intersectoral network model to the economies of two countries.

This paper studies the conditions under which debt securities that make the cost of debt contingent on the issuer's carbon emissions, similar to sustainability-linked loans and bonds, can be equivalent to a carbon tax. The paper proposes a model in which standard and environmentally-oriented agents can adopt polluting and nonpolluting technologies, with the latter being less profitable than the former. A carbon tax can correct the laissez-faire economy in which the polluting technology is adopted by standard agents, but requires sufficient political support. Carbon-contingent securities provide an alternative price incentive for standard agents to adopt the nonpolluting technology, but require sufficient funds to fully substitute the regulatory tool. Absent political support for the tax, carbon-contingent securities can only improve welfare, but the same is not true when some support for a carbon tax exists. Understanding the conditions under which the regulatory and capital market tools are substitutes or complements within one economy is an important steppingstone in thinking about carbon pricing globally. It sheds light, for instance, on how developed economies can deploy finance to curb carbon emissions in developing economies where support for a carbon tax does not exist.

We demonstrate that the carbon tax imposed by the Canadian province of British Columbia caused a decline in short-run gasoline demand that is significantly greater than would be expected from an equivalent increase in the market price of gasoline. That the carbon tax is more salient, or yields a larger change in demand than equivalent market price movements, is robust to a range of specifications. Along with calculating the reduction in carbon dioxide emissions attributable to the tax, we discuss potential explanations for the differential consumer responses to the carbon tax relative to the market-determined price.

This article explores the links between energy policy, tax policy and global warming. This article focuses on tax policy, because the emerging consensus among legal scholars favors economic incentives rather than command-and-control regulations for reaching environmental goals, and the Federal income tax has proved an effective delivery system for economic incentives. After briefly discussing of the science of global warming and the provisions of the Kyoto Protocol on Climate Change, the article reviews the impact of both existing tax law and current proposals for energy legislation on global warming, as well as potential international law consequences of failure to act to curtail global warming. This analysis also includes a discussion of global warming as "tragedy of the commons" issue and reflects on how psychological factors and economic beliefs may affect the public's level of concern about global warming. Concluding that both present law and current proposals create incentives for continued and increasing use of greenhouse gas emitting fossil fuels, the article outlines a three part strategy for curtailing global warming through tax policy: (1) reducing or eliminating the present law subsidies for fossil fuel use while creating and strengthening incentives for alternative energy generation; (2) imposing a carbon tax; and (3) creating incentives for development of carbon sequestration projects in privately held forests in the United States. The article studies the effectiveness of these proposals by comparing similar proposals in effect in other countries and by considering the classic tax policy goals of equity and efficiency. The tax system is an appropriate and effective way to encourage businesses to adopt an environmental ethic and take action to reverse global warming. Strong economic, esthetic, and moral arguments support changing our tax system to protect the environment from global warming.

AbstractSupply of a nonrenewable resource adjusts through two margins: the rate at which new fields are opened and the rate of depletion of open fields. The paper combines these margins in a model in which there is a continuum of fields with varying capital costs. Opening a new field involves sinking a capital cost, and the date of opening is chosen to maximize the present value of the field. Depletion of each open field follows a Hotelling rule, modified by the fact that faster depletion reduces the amount that can ultimately be extracted. The paper studies the equilibrium paths of output and price. Under specific but reasonable assumptions on demand and the cost distribution of deposits it is found that the rate of growth of price is constant and independent of the rate of interest, depending instead on characteristics of demand and geology.

This paper examines the effectiveness of carbon taxes on macroeconomic performance when manufacturing firms have the opportunity to change their scale of operation and degree of formality. The hypothesis is that when tax evasion or elusion is possible, it cannot be ruled out that emissions increase rather than decrease due to the reallocation of resources from the rest of manufacturing towards informal small-scale firms. When informality is high, industry could adapt to carbon taxes by reducing the scale of operation of big firms and increasing the number of small firms. However, when taxes are enforceable in all types of firms, there is a cost in terms of GDP and employment, since small-scale firms are more labor intensive. For numerical experiments, two CGE models calibrated for Argentina and Mexico are used. The 'domestic leakage' is found to be more relevant for Argentina than for Mexico.

We examine the lifetime incidence and intergenerational distributional effects of an economy-wide carbon tax swap using a numerical dynamic general equilibrium model with overlapping generations of the U.S. economy. We highlight various fundamental choices in policy design including (1) the level of the initial carbon tax, (2) the growth rate of the carbon tax trajectory of over time, and (3) alternative ways for revenue recycling. Without revenue recycling, we find that generations born before the tax is introduced experience smaller welfare losses, or even gain, relative to future generations. For sufficiently low growth rates of the tax trajectory, the impacts for distant future generations decrease over time. For future generations born after the introduction of the tax, the negative welfare impacts are the smallest (largest) when revenues are recycled through lowering pre-existing capital income taxes (through per-capita lump-sum rebates). For generations born before the tax is introduced, we find that lump-sum rebates favor very old generations and labor (capital) income tax recycling favors very young generations (generations of intermediate age).