Distribution matters: Taxes vs. emissions trading in post Kyoto climate regimes

Arbeitspapier

The policy instruments for emissions reductions will be an integral part of a Post Kyoto Climate Regime. In this paper we compare a harmonized international carbon tax to a cap and trade system with different allocation rules for the emission caps. The caps are based either on the requirement for equal percentage reductions in all countries or the "contraction and convergence" proposal that leads to converging per capita emission rights. The quantitative analysis is based on simulations with the CGE model DART. The harmonized carbon tax tends to favor industrialized countries but is less favorable to developing countries. The welfare effects of a cap and trade system depend crucially on the allocation rule for emission rights. The "contraction and convergence" approach leads to welfare gains for countries like China, India and Subsaharan Africa whereas it imposes welfare losses upon industrialized countries which are larger than those under other cap and trade schemes or a tax scenario. Independent from the allocation rule that is used regions exporting fossil fuels experience strong welfare losses from the reduction in the demand for fossil fuels and the fall in prices that results from the imposition of the international climate policies.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Kiel Working Paper ; No. 1380

Classification and Topics

• Classification: Wirtschaft ; Energy: Government Policy ; Pollution Control Adoption and Costs; Distributional Effects; Employment Effects ; Taxation and Subsidies: Incidence ; Taxation and Subsidies: Externalities; Redistributive Effects; Environmental Taxes and Subsidies ; International Fiscal Issues; International Public Goods ; Computable and Other Applied General Equilibrium Models
• Subject: Emission targets ; Emission trading ; Taxes ; Distribution ; Post Kyoto ; Klimaschutz ; Umweltauflage ; Emissionshandel ; Ökosteuer ; Wohlfahrtseffekt ; Vergleich ; Wirtschaftspolitische Wirkungsanalyse ; Welt

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Peterson, Sonja ; Klepper, Gernot
• Event: Veröffentlichung
• (who): Kiel Institute for the World Economy (IfW)
• (where): Kiel
• (when): 2007

Further information

• Handle: http://hdl.handle.net/10419/4076
• Last update: 10.03.2025, 11:43 AM CET