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Unilaterally removing implicit subsidies for maritime fuels

Dirk Heine () and Susanne Gäde
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Dirk Heine: Erasmus University Rotterdam

International Economics and Economic Policy, 2018, vol. 15, issue 2, No 14, 523-545

Abstract: Abstract Many academics and policymakers agree that implicit tax subsidies for maritime fuels — which are currently granted around the world — are inefficient, but that their abolishment requires a unanimous international agreement. Such an agreement is deemed indispensable because any unilateral action would be impossible due to massive tax competition in this industry, competitiveness effects and the legal limits on regulating an industry operating mostly in international waters, thus outside of any state’s jurisdiction. However, an international agreement to solve these problems has proven impossible to reach, thus resulting in the conservation of the status quo. To break this deadlock, we propose a mechanism whereby a small coalition of countries, to start with, can abolish these implicit tax subsidies even in the absence of an international agreement. This incentive-compatible scheme solves the above-mentioned issues. The mechanism is furthermore designed to avoid locking in a sub-global scheme. Instead, it has the potential to contribute to unlocking the gridlock in negotiations over a global agreement on this matter.

Keywords: Carbon taxation; Maritime emissions; Regional action; International agreements; Tax competition (search for similar items in EconPapers)
JEL-codes: H23 H87 K33 K34 Q54 Q58 (search for similar items in EconPapers)
Date: 2018
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DOI: 10.1007/s10368-017-0410-6

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