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Over the last few decades, several instruments have evolved to deal with similar energy and environmental challenges. For instance, the economic literature prescribes separate tax or cap-and-trade systems to internalize negative environmental externalities and subsidies to internalize positive externalities such as research and development. However, policy is not straightforward because of the influence on cost and competition and concerns for regional employment, economic activity within certain industries and any distributional effects. Tax discrimination, subsidies and regulations then undermine the efficiency of energy instruments. To balance any environmental concerns, other instruments, including green and white certificates, have been created. While innovative, these work as simple combinations of taxes and subsidies. While the extant literature thoroughly analyzes the partial effects of these instruments, there has been little focus on their basics and the effects of aggregate taxes and subsidies. This complexity calls for research on the efficiency of each instrument, including the administration and transaction costs associated with holding a large set of instruments. We should consider the coordination and simplification of policy tools before complicating the system further by introducing new, primarily equivalent, instruments.

AbstractThis paper analyses and compares the performance of resource taxes and capital taxes in financing public goods while considering the positive effects of public expenditure on firm productivity. It is motivated by Franks et al. (2017), who argue that the advantage of the resource tax consists in its potential to reap foreign resource rents. I employ an analytical general equilibrium framework of identical resource‐poor countries, where local firms use internationally mobile capital and a net imported resource in production as well as local public infrastructure. The latter is financed solely by either taxing the input of the resource or capital. The choice of the policy instrument is exogenous to policy makers and symmetric across countries. I find that expenditure on infrastructure renders the impact of fiscal policy on the terms of trade ambiguous under resource taxation and negative under capital taxation. Moreover, public expenditure weakens the outflow of factors moderating the deficit of public spending caused by tax competition. This holds for both policy scenarios. Considering both effects simultaneously, resource taxation cannot generally be identified as the policy to provide higher provision or efficiency. A numerical exercise shows cases for higher provision of either policy.

This paper studies the effects on fossil fuel prices, extraction paths and petroleum wealth of an international carbon tax on fossil fuel consumption. We present an intertemporal equilibrium model for fossil fuels, where the main focus is on the oil market. The impacts of a global carbon tax of $10 per barrel of oil depend heavily on the market structure in the oil market. If OPEC acts as a cartel, they reduce their production to maintain the oil price. Thus, the effects on the oil wealth of the competitive fringe is minor, while OPEC's oil wealth is considerably reduced. This may explain the difference in attitudes of OPEC and other oil producing countries to international global warming negotiations. If, on the other side, the oil market is competitive, the highest relative reductions in the oil wealth are to be found among non-OPEC producers.

The aim of this paper is to examine the impacts of a global carbon tax on fossil fuel markets. In particular, the effect on the Norwegian, as well as the global, petroleum wealth is studied. Most empirical models of fossil fuel markets either use an exogenous price path, or model the supply side as being independent of future expectations. Hence, they are not able to test how the exhaustibility feature of fossil fuels affects the sharing of the tax burden between producers and consumers. We study a simple, dynamic model of a competitive fossil fuel market, and we first derive some general theoretical results regarding how a carbon tax may affect the producer and consumer prices. Then, simulations of the global oil market indicate that a fixed carbon tax of e.g. $10/barrel of oil may reduce the petroleum wealth of the average oil producer by 33-42%. The Norwegian petroleum wealth may decrease more than this, by 47-68%. The latter reduction may correspond to a yearly income loss of about 3% of Norwegian GDP. However, the figures should only be considered as very rough estimates, because of the simplistic nature of the model. Keywords: Carbon Taxes, Exhaustible Resources, Petroleum Wealth

This paper examines the implementation issues and barriers for introducing a carbon tax at EU member state level. Important success determinants are related to the political economy of introducing taxes (negotiations with stakeholders, concessions, changes in proposed legislation, compromises, etc.) which translate i.a. into competitiveness issues, and fairness/equity/distribution issues. For these the design of the carbon tax exemptions, and safeguards to prevent progressivity and the use of the tax proceeds are important. The analysis will focus on the "frontrunner" countries in the EU which have been very successful in terms of the introduction of carbon taxes (Sweden, Denmark and Finland). The countries employed different implementation strategies but underscore the importance of successful issue, timing, linking and to foster political support by safeguarding competitiveness and by addressing income distributions.

Countries with an active climate policy often use several other policy instruments in addition to a price on carbon emissions, such as subsidies to renewable energy. An obvious reason for subsidizing alternatives to carbon energy is that the price of carbon emissions is too low. The paper derives implications for a second-best climate policy if for some reason the price of carbon emissions is lower than the Pigovian level, and also discusses reasons policy makers might have for setting the tax rate at an inefficiently low level. Even if the current tax rate is optimally set, governments cannot commit to future tax rates. In some cases this inabilty to commit may justify subsidies to investments in renewable energy.

This paper analyses the effects of a carbon tax on a small open petroleum producing economy, using an aggregate intertemporal general equilibrium model with differentiated products. The long run effects on welfare and capital accumulation of both a unilateral and an international carbon tax are emphasised. It is shown that the steady state welfare effect of a carbon tax can be positive or negative, depending on substitution effects which create efficiency losses, and income effects from changes in terms of trade. The presence of an initial tax wedge implies that there is an ambiguous relationship between the tax level and steady state welfare. With an international carbon tax the terms of trade gain is smaller and the petroleum revenue is reduced compared to a unilateral carbon tax, implying that for a petroleum producing economy an international carbon tax may be less beneficial than a unilateral carbon tax.

Abstract The taxation of externalities is the subject of this first of seven chapters that examine potential sources of development funding. It considers the possible role of environmental taxes for economic development. The chapter starts with a review of the welfare economics theory of environmental taxation in a single closed economy (analytical details are provided in an appendix A). The different sections then discuss alternatives to taxes as instruments of environmental policy, considering both fixed and transferable quotas; review the double dividend issue; consider the extent to which distributional concerns should be reflected in the design of environmental policy; take up some special problems in the application of environmental externalities to developing economies; extend the analysis from the single country case to the case of global externalities, where each individual country is affected by the environmental pollution of all other countries (the discussion is with specific reference to the carbon tax, and a formal analysis in the context of a two‐country model is given in a second appendix); consider the political economy of global environmental taxes, by comparing alternative tax designs with regard to the equity‐efficiency trade‐off; discuss some practical problems of tax collection; and evaluate the revenue potential of environmental taxes with special reference to the carbon tax.