Optimal Pricing for Carbon Dioxide Removal Under Inter-Regional Leakage
| Autor: | Franks, Max, Kalkuhl, Matthias, Lessmann, Kai |
|---|---|
| Jazyk: | angličtina |
| Rok vydání: | 2022 |
| Předmět: | |
| Popis: | Carbon dioxide removal (CDR) moves atmospheric carbon to geological or land-based sinks. In a first-best setting, the optimal use of CDR is achieved by a removal subsidy that equals the optimal carbon tax and marginal damages. We derive second-best subsidies for CDR when no global carbon price exists but a national government implements a unilateral climate policy. We find that the optimal carbon tax differs from an optimal CDR subsidy because of carbon leakage, terms-of-trade and fossil resource rent dynamics. First, the optimal removal subsidy tends to be larger than the carbon tax because of lower supply-side leakage on fossil resource markets. Second, terms-of-trade effects exacerbate this wedge for net resource exporters, implying even larger removal subsidies. Third, the optimal removal subsidy may fall below the carbon tax for resource-poor countries when marginal environmental damages are small. CEPA Discussion Papers; 43 |
| Databáze: | OpenAIRE |
| Externí odkaz: |
|