Joint non-OPEC carbon taxes and the transfer of OPEC monopoly rents

Yan Dong () and John Whalley

Journal of Policy Modeling, 2012, vol. 34, issue 1, 49-63

Abstract: Carbon taxes have largely been discussed as individual country measures (even if taken simultaneously) aimed to reduce carbon emissions, slow global warning, and internalizing the externalities associated with carbon generating activities, such as power generation. There has however been little emphasis on the incentives for subgroups of countries to jointly peruse carbon taxes. Yet for large importers of oil such as the US, the EU and China, their incentive is clearly to act together and have their taxes partly or wholly borne by oil exporters given this incentives. This paper discusses the potential for joint OECD (or non-OPEC) carbon taxes to reduce OPEC's monopoly rent and provide benefits to non-OPEC countries provided jointly agreed trigger strategies are adhered to enforce mutual cooperation. To this end, we develop a multi-region general equilibrium structure with an endogenously determined oil supply by OPEC in which both emissions and energy prices are endogenously determined. Our results suggest that jointly enacted carbon taxes by the US, the EU and China can be heavily borne by oil exporters; they reduce the welfare of OPEC and increase the welfare of non-OPEC countries. These carbon taxes reduce global emissions, but the effect is small.

Keywords: Carbon tax; non-OPEC; Monopoly rent; Global warming; Carbon emissions (search for similar items in EconPapers)
JEL-codes: D42 H25 Q01 (search for similar items in EconPapers)
Date: 2012
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (10)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jpolmo:v:34:y:2012:i:1:p:49-63

DOI: 10.1016/j.jpolmod.2011.08.001

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