Should the Carbon Price Be the Same in All Countries?

Antoine d'Autume (), Katheline Schubert and Cees Withagen
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Antoine d'Autume: CES - Centre d'économie de la Sorbonne - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique, PSE - Paris School of Economics - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - EHESS - École des hautes études en sciences sociales - ENPC - École nationale des ponts et chaussées - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement

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Abstract: International di¤erences in fuel taxation are huge, and may be justi…ed by different local negative externalities that taxes must correct, as well as by di¤erent preferences for public spending. In this context, should a worldwide uniform carbon tax be added to these local taxes to correct the global warming externality? We address this question in a second best framework à la Ramsey, where public goods have to be …nanced through distortionary taxation and the cost of public funds has to be weighted against the utility of public goods. We show that when lump-sum transfers between countries are allowed for, the second best tax on the polluting good may be decomposed into three parts: one, country-speci…c, dealing with the local negative externality, a second one, country-speci…c, dealing with the cost of levying public funds, and a third one, global, dealing with the global externality and which can be interpreted as the carbon price. Our main contribution is to show that the uniformity of the carbon price should still hold in this second best framework. Nevertheless, if lump-sum transfers between governments are impossible to implement, international di¤erentiation of the carbon price is the only way to take care of equity concerns. keywords: carbon price, second best, Pigovian taxation

Keywords: carbon price; second best; Pigovian taxation (search for similar items in EconPapers)
Date: 2016-03
New Economics Papers: this item is included in nep-ene, nep-env and nep-sog
Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-01300261v1
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Published in Journal of Public Economic Theory, 2016, ⟨10.1111/jpet.12162⟩

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Related works:
Journal Article: Should the Carbon Price Be the Same in All Countries? (2016)
Working Paper: Should the Carbon Price Be the Same in All Countries? (2016)
Working Paper: Should the Carbon Price Be the Same in All Countries? (2016)
Working Paper: Should the carbon price be the same in all countries ? (2011)
Working Paper: Should the carbon price be the same in all countries ? (2011)
Working Paper: Should the carbon price be the same in all countries? (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:halshs-01300261

DOI: 10.1111/jpet.12162

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