Should the carbon price be the same in all countries ?

Antoine d'Autume, Katheline Schubert and Cees Withagen

Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) from HAL

Abstract: International differences in fuel taxation are huge, and may be justified by different local negative externalities that taxes must correct, as well as by different preferences for public spending. In this context, should a worldwide unique carbon tax be added to these local taxes to correct the global warming externality ? We address this question in a second best framework à la Ramsey, where public goods have to be financed through distortionary taxation and the cost of public funds has to be weighted against the utility of public goods. We show that when lump-sum transfers between countries are allowed for, the second best tax on the polluting good may be decomposed into three parts : one, country specific, dealing with the local negative externality, a second one, country specific, dealing with the cost of public funds, and a third one, global, dealing with the global externality and which can be interpreted as the carbon price. Our main contribution is to show that the uniqueness of the carbon price should still hold in this second best framework. Nevertheless, if lump-sum transfers between governments are impossible to implement, international differentiation of the carbon price is the only way to take care of equity concerns.

Keywords: Pigovian taxation; Carbon price; second best; Pigovian taxation.; Prix du carbone; second rang; taxation pigouvienne. (search for similar items in EconPapers)
Date: 2011-08
New Economics Papers: this item is included in nep-ene and nep-env
Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-00654239v1
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Published in 2011

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Related works:
Journal Article: Should the Carbon Price Be the Same in All Countries? (2016)
Working Paper: Should the Carbon Price Be the Same in All Countries? (2016)
Working Paper: Should the Carbon Price Be the Same in All Countries? (2016)
Working Paper: Should the Carbon Price Be the Same in All Countries? (2016)
Working Paper: Should the carbon price be the same in all countries ? (2011)
Working Paper: Should the carbon price be the same in all countries? (2011)
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