Climate Policy in the Shadow of National Security

Peter K. Kruse-Andersen
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Peter K. Kruse-Andersen: Department of Economics, University of Copenhagen

No 22-01, Discussion Papers from University of Copenhagen. Department of Economics

Abstract: Recent events have clarified the interdependence of national security and energy supply. Specifically, it has become increasingly evident that heavy reliance on foreign fossil fuel supply may come at a national security cost. The present study derives the optimal policy of a net fossil fuel importing economy with a binding climate target, when fossil fuel imports are associated with national security costs. The study shows that optimal carbon taxes are differentiated across fossil fuels and that domestic fossil fuel production should be subsidized. Further, carbon capture and storage should be taxed, while no subsidies should be granted to green energy production. These results contrast the typical climate policy recommendation of uniform carbon taxation.

Keywords: Climate policy; National security; Energy security; Environmental taxes and subsidies (search for similar items in EconPapers)
JEL-codes: F52 H23 H56 Q43 Q54 (search for similar items in EconPapers)
Date: 2022
New Economics Papers: this item is included in nep-ene, nep-env and nep-res
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Persistent link: https://EconPapers.repec.org/RePEc:kud:kuiedp:2201

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