Taxing Extraction of Carbon Emissions: Effects along The Global Carbon Emissions Chain

Description: Introducing a price on carbon emissions is one of the two most common marketbased solutions that economist recommend to fight global warming. Using the unique characteristics of global climate change, we study a price mechanism on carbon as an instrument to solve the climate change market failure along the chain of carbon emissions - extraction of fossil fuels, production of emissions, and consumption of final goods. We consider extraction as the point of taxation and study the scenarios for countries based on the net balance of extracted emissions and embodied emissions trade. Drawing from the theoretical identification of the (dis)incentives and (dis)advantages based on the condition of trade of countries, we discuss separately the scenarios of a tax in terms of revenue transfer, international trade and the potential effects of emissions reduction on the extraction of fossil fuels. We identify 4 groups of countries combining their role on the international context and conclude that, under a tax on extraction, the condition of trade on extracted and embodied emissions shapes differently the (dis)advantages and (dis)incentives than a tax at the point of emission. We show that under that scenario, net-importers of extracted emissions that are net-importers of embodied emissions at the same time, would face the largest costs, while opening incentives to reduce carbon intensity and reduce international demand of fossil fuels.

Topic: ECONOM?A
CAMBIO CLIM?TICO
EXTRACCI?N DEL CARB?N
COMBUSTIBLE
IMPUESTO AL CARB?N

Get full text: http://repositorio.educacionsuperior.gob.ec/handle/28000/2477