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Fossil Fuel Supply and Climate Policies with Limited Reach

versione breve Basic economic theory suggests a uniform Pigouvian tax for the correction of climate externalities. But currently realistic climate policies are (i) limited in their geographical extent, (ii) substantially less stringent than most cost-benefit analysis on climate change suggest to be optimal, and finally, (iii) the evolution of climate policies over time contains some strong ‘arbitrary’ component compared to what might be desirable. These limitations make the design of sensible climate policy complicated. A major part of the project deals with these issues. It has been pointed out that a greenhouse gas tax path with initially low rates that increase rapidly over time may aggravate the climate problem instead of alleviating it. The first contribution relativizes this claim by explaining that the question of introducing a currently feasible tax now resp. abstaining from it, does not imply that chosen tax will be relevant for the entire future; we show that given future measures, any currently introduced tax may be beneficial for climate. A second contribution explains that unilateral market based climate policy implies emission taxes should not vary only accross economic sectors but (due to fuel-specific leakage) also accross the fossil fuels from which the emissions stem from. These two first contributions start with theoretical analyses but will be extended with numerical dynamic general equilibrium analysis.
An additional contribution concerns the impact of uncertainty about greenhouse gas emission reduction costs and benefits on the optimal instrument choice between an emission tax and a system of tradable emisison permits. Traditional literature assumed worldwide optimal policies and found that the uncertainty has ambiguous impacts on the optimal instrument choice. The research project examines this issue in the case for realistic (non-global) climate policies, with a first analysis strongly suggesting that for unilateral policies, taxes seem the unambigously best choice.
   
parole chiave Regional Climate Policy, Carbon Tax, Fossil Fuel Supply, Dynamic Carbon Leakage, Green Paradox, Coal Liquefaction, Emission Discounting, Tradable Permits
   
homepage http://www.habermacher.net/research
partner University of Oxford
tipo progetto di dissertazione
status corrente
inizio progetto 2012
fine progetto 2013
informations additionelles
argomenti Regional Climate Policy, Carbon Tax, Fossil Fuel Supply, Dynamic Carbon Leakage, Green Paradox, Coal Liquefaction, Emission Discounting, Tradable Permits
metodi Partial Equilibrium Modeling, Dynamic Computational General Equilibrium Modeling, Dynamic Optimization
profile area SEPS - Quantitative Economic Methods
contatto Florian Habermacher