Leakage, Welfare, and Cost-Effectiveness of Carbon Policy

Kathy Baylis, Don Fullerton () and Daniel H. Karney

No 18898, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We extend the model of Fullerton, Karney, and Baylis (2012 working paper) to explore cost-effectiveness of unilateral climate policy in the presence of leakage. We ignore the welfare gain from reducing greenhouse gas emissions and focus on the welfare cost of the emissions tax or permit scheme. Whereas that prior paper solves for changes in emissions quantities and finds that leakage may be negative, we show here that all cases with negative leakage in that model are cases where a unilateral carbon tax results in a welfare loss. With positive leakage, however, a unilateral policy can improve welfare.

JEL-codes: Q27 Q28 Q56 Q58 (search for similar items in EconPapers)
Date: 2013-03
New Economics Papers: this item is included in nep-cwa, nep-ene, nep-env, nep-reg and nep-res
Note: EEE PE
References: View complete reference list from CitEc
Citations: View citations in EconPapers (33)

Published as Kathy Baylis & Don Fullerton & Daniel H. Karney, 2013. "Leakage, Welfare, and Cost-Effectiveness of Carbon Policy," American Economic Review, American Economic Association, vol. 103(3), pages 332-37, May.

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Journal Article: Leakage, Welfare, and Cost-Effectiveness of Carbon Policy (2013)
Working Paper: Leakage, Welfare, and Cost-Effectiveness of Carbon Policy (2013)
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