Optimal Energy Taxes and Subsidies under a Cost-Effective Unilateral Climate Policy: Addressing Carbon Leakage

Publikation: Working paperForskning

Standard

Optimal Energy Taxes and Subsidies under a Cost-Effective Unilateral Climate Policy : Addressing Carbon Leakage. / Kruse-Andersen, Peter Kjær; Sørensen, Peter Birch.

SSRN: Social Science Research Network, 2019.

Publikation: Working paperForskning

Harvard

Kruse-Andersen, PK & Sørensen, PB 2019 'Optimal Energy Taxes and Subsidies under a Cost-Effective Unilateral Climate Policy: Addressing Carbon Leakage' SSRN: Social Science Research Network. <https://ssrn.com/abstract=3480926>

APA

Kruse-Andersen, P. K., & Sørensen, P. B. (2019). Optimal Energy Taxes and Subsidies under a Cost-Effective Unilateral Climate Policy: Addressing Carbon Leakage. SSRN: Social Science Research Network. CESifo Working Papers Nr. 7920 https://ssrn.com/abstract=3480926

Vancouver

Kruse-Andersen PK, Sørensen PB. Optimal Energy Taxes and Subsidies under a Cost-Effective Unilateral Climate Policy: Addressing Carbon Leakage. SSRN: Social Science Research Network. 2019 nov 27.

Author

Kruse-Andersen, Peter Kjær ; Sørensen, Peter Birch. / Optimal Energy Taxes and Subsidies under a Cost-Effective Unilateral Climate Policy : Addressing Carbon Leakage. SSRN: Social Science Research Network, 2019. (CESifo Working Papers; Nr. 7920).

Bibtex

@techreport{61f99a6caedf4a0fb4d8b03d83539720,
title = "Optimal Energy Taxes and Subsidies under a Cost-Effective Unilateral Climate Policy: Addressing Carbon Leakage",
abstract = "We analyze how a country pursuing a unilateral climate policy may contribute to a reduction in global CO2 emissions in a cost-effective way. To do so its system of energy taxes and subsidies must account for leakage of emissions from the domestic to the foreign economy. We focus on leakage occurring via international trade in electricity and via shifts between domestic and foreign production of other goods. The optimal tax-subsidy scheme is based on an intuitive principle: Impose a uniform carbon tax on all additions to global emissions caused by changes in domestic production and consumption of energy, including additions to emissions occurring via shifts in international trade. Emissions from the sector exposed to foreign competition should be taxed at reduced rates to avoid excessive carbon leakage, and a part of the carbon tax on electricity should be levied at the consumer rather than the producer level to ensure taxation of the carbon content of imported electricity. Producers of renewables-based electricity should receive a subsidy to internalize their contribution to the reduction of global emissions. In other sectors emissions should be taxed at a uniform rate corresponding to the marginal social cost of meeting the target for emissions reduction. Simulations calibrated to data for the Danish economy suggest that redesigning energy taxes and subsidies to account for carbon leakage can generate a welfare gain.",
keywords = "Faculty of Social Sciences, optimal unilateral climate policy, carbon leakage, optimal energy taxes and subsidies",
author = "Kruse-Andersen, {Peter Kj{\ae}r} and S{\o}rensen, {Peter Birch}",
year = "2019",
month = nov,
day = "27",
language = "English",
series = "CESifo Working Papers",
number = "7920",
publisher = "SSRN: Social Science Research Network",
type = "WorkingPaper",
institution = "SSRN: Social Science Research Network",

}

RIS

TY - UNPB

T1 - Optimal Energy Taxes and Subsidies under a Cost-Effective Unilateral Climate Policy

T2 - Addressing Carbon Leakage

AU - Kruse-Andersen, Peter Kjær

AU - Sørensen, Peter Birch

PY - 2019/11/27

Y1 - 2019/11/27

N2 - We analyze how a country pursuing a unilateral climate policy may contribute to a reduction in global CO2 emissions in a cost-effective way. To do so its system of energy taxes and subsidies must account for leakage of emissions from the domestic to the foreign economy. We focus on leakage occurring via international trade in electricity and via shifts between domestic and foreign production of other goods. The optimal tax-subsidy scheme is based on an intuitive principle: Impose a uniform carbon tax on all additions to global emissions caused by changes in domestic production and consumption of energy, including additions to emissions occurring via shifts in international trade. Emissions from the sector exposed to foreign competition should be taxed at reduced rates to avoid excessive carbon leakage, and a part of the carbon tax on electricity should be levied at the consumer rather than the producer level to ensure taxation of the carbon content of imported electricity. Producers of renewables-based electricity should receive a subsidy to internalize their contribution to the reduction of global emissions. In other sectors emissions should be taxed at a uniform rate corresponding to the marginal social cost of meeting the target for emissions reduction. Simulations calibrated to data for the Danish economy suggest that redesigning energy taxes and subsidies to account for carbon leakage can generate a welfare gain.

AB - We analyze how a country pursuing a unilateral climate policy may contribute to a reduction in global CO2 emissions in a cost-effective way. To do so its system of energy taxes and subsidies must account for leakage of emissions from the domestic to the foreign economy. We focus on leakage occurring via international trade in electricity and via shifts between domestic and foreign production of other goods. The optimal tax-subsidy scheme is based on an intuitive principle: Impose a uniform carbon tax on all additions to global emissions caused by changes in domestic production and consumption of energy, including additions to emissions occurring via shifts in international trade. Emissions from the sector exposed to foreign competition should be taxed at reduced rates to avoid excessive carbon leakage, and a part of the carbon tax on electricity should be levied at the consumer rather than the producer level to ensure taxation of the carbon content of imported electricity. Producers of renewables-based electricity should receive a subsidy to internalize their contribution to the reduction of global emissions. In other sectors emissions should be taxed at a uniform rate corresponding to the marginal social cost of meeting the target for emissions reduction. Simulations calibrated to data for the Danish economy suggest that redesigning energy taxes and subsidies to account for carbon leakage can generate a welfare gain.

KW - Faculty of Social Sciences

KW - optimal unilateral climate policy

KW - carbon leakage

KW - optimal energy taxes and subsidies

M3 - Working paper

T3 - CESifo Working Papers

BT - Optimal Energy Taxes and Subsidies under a Cost-Effective Unilateral Climate Policy

PB - SSRN: Social Science Research Network

ER -

ID: 230999486