Cost effectiveness of a combination of instruments for global warming: a quantitative approach for Spain

Abstract

Climate change is an important environmental problem and one whose economic implications are many and varied. This paper starts with the presumption that mitigation of greenhouse gases is a necessary policy that has to be designed in a cost effective way. It is well known that market instruments are the best option for cost effectiveness. But the discussion regarding which of the various market instruments should be used, how they may interact and what combinations of policies should be implemented is still open and very lively. In this paper we propose a combination of instruments: the marketable emission permits already in place in Europe for major economic sectors and a CO 2 tax for economic sectors not included in the emissions permit scheme. The study uses an applied general equilibrium model for the Spanish economy to compute the results obtained with the new mix of instruments proposed. As the combination of the market for emission permits and the CO 2 tax admits different possibilities that depend on how the mitigation is distributed among the economic sectors, we concentrate on four possibilities: cost-effective, equalitarian, proportional to emissions, and proportional to output distributions. Other alternatives to the CO 2 tax are also analysed (tax on energy, on oil and on electricity). Our findings suggest that careful, well designed policies are needed as any deviation imposes significant additional costs that increase more than proportionally to the level of emissions reduction targeted by the EU.

New Green Tax Reforms: Ex-Ante Assessments for Spain

“…€10/tCO 2 and €30/tCO 2 . The first is similar to the tax rate that would allow for a significant cost-effective reduction of CO 2 emissions in Spain [87]. Alternatively, we simulate a tax of €30/tCO 2, considering the cost of the externalities associated with CO 2 emissions [88], as well as several opinions in the academic literature.…”

Impacto Da Tributación Autonómica Sobre Emisións. Unha Perspectiva Microeconómica

“…Na literatura para España, aparecen diferentes propostas de aplicación e reforma fiscal sobre as emisións. Un detallado resumo das mesmas atópase na meta-análise de Gago et al (2014), onde destacan as aportacións de Labandeira e Labeaga (1999, 2002, Gallastegui et al (2011) e González-Eguino (2011), entre outros.…”