Thumbnail Image
Item

Climate policy with tied hands optimal resource taxation under implementation lags

di Maria,C.
; 
Smulders,Sjak
; 
van der Werf,E.H.
Abstract
In the presence of implementation lags, announced Pigouvian taxation leads to fossil fuel prices that are too low from society’s perspective. This results in excessive emissions and reduced incentives for green innovation. Such effects are compounded by the presence of pre-existing subsidies to fossil fuel use. We show that the intertemporal resource tax path may need to be modified to optimally take into account the perverse incentives from policy lags and pre-existing policies. We find that it might be optimal to subsidize, rather than tax resource extraction at the instant of implementation.
Description
Date
2017-03
Journal Title
Journal ISSN
Volume Title
Publisher
Collections
Tilburg University Research Output Collection
Show all metadata
Files
Thumbnail Image
Climate_Policy_with_Tied_Hands.pdf
Adobe PDF, 480.24 KB
Research Projects
Organizational Units
Journal Issue
Keywords
climate policy, second-best, carbon tax, non-renewable resources, resource taxation, implementation lag, green paradox, Q31 - Demand and Supply ; Prices, Q41 - Demand and Supply ; Prices, Q54 - Climate ; Natural Disasters and Their Management ; Global Warming, Q58 - Government Policy, SDG 8 - Decent Work and Economic Growth, SDG 13 - Climate Action
Citation
di Maria, C, Smulders, S & van der Werf, E H 2017, 'Climate policy with tied hands optimal resource taxation under implementation lags', Environmental & Resource Economics, vol. 66, no. 3, pp. 537-551. https://doi.org/10.1007/s10640-016-0091-6
URI
https://hdl.handle.net/20.500.14602/66430
Embedded videos