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High Does Nothing and Rising Is Worse: Carbon Taxes Should Keep Declining to Cut Harmful Emissions

Peter J N Sinclair

The Manchester School of Economic & Social Studies, 1992, vol. 60, issue 1, 41-52

Abstract: It is often that greenhouse gas emissions should be curbed by taxes on activities that generate them. This paper continues the case for taxes on fossil fuels in the context of an infinite-horizon growth model. Under simple conditions, a constant tax rate on energy use is found to exert no real effect: energy taxes just squeeze rents and have no impact on the time-profile of extraction. Expectations of falling energy taxes are what is needed to reduce extraction rates and postpone such adverse consequences that carbon emissions induce. Copyright 1992 by Blackwell Publishers Ltd and The Victoria University of Manchester

Date: 1992
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