Why Finance Ministers Favor Carbon Taxes, Even If They Do Not Take Climate Change into Account

Franks, Max; Edenhofer, Ottmar; Lessmann, Kai

doi:10.2139/ssrn.2599482

Cited by 14 publications

(17 citation statements)

References 49 publications

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“…The generation of revenues by carbon pricing could be an additional motivation for countries to foster climate policy. Those revenues could be used for infrastructure investment or tax or debt reduction (26,27).…”

Section: Discussionmentioning

confidence: 99%

Drivers for the renaissance of coal

Steckel

Edenhofer

Jakob

2015

Proc. Natl. Acad. Sci. U.S.A.

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115

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Coal was central to the industrial revolution, but in the 20th century it increasingly was superseded by oil and gas. However, in recent years coal again has become the predominant source of global carbon emissions. We show that this trend of rapidly increasing coal-based emissions is not restricted to a few individual countries such as China. Rather, we are witnessing a global renaissance of coal majorly driven by poor, fast-growing countries that increasingly rely on coal to satisfy their growing energy demand. The low price of coal relative to gas and oil has played an important role in accelerating coal consumption since the end of the 1990s. In this article, we show that in the increasingly integrated global coal market the availability of a domestic coal resource does not have a statistically significant impact on the use of coal and related emissions. These findings have important implications for climate change mitigation: If future economic growth of poor countries is fueled mainly by coal, ambitious mitigation targets very likely will become infeasible. Building new coal power plant capacities will lead to lock-in effects for the next few decades. If that lock-in is to be avoided, international climate policy must find ways to offer viable alternatives to coal for developing countries. Convention on Climate Change (UNFCCC) to limit and reduce greenhouse gas emission to prevent dangerous anthropogenic interference with the climate system (1), global emissions have continued to rise steadily. Since 1971 global annual energy-related CO 2 emissions have more than doubled (Fig. 1A). In recent years emission growth has accelerated further, interrupted only briefly during the recent economic crisis. Assessments of the factors driving these developments using the Kaya* identity have identified growing per-capita incomes, especially in developing and newly industrializing countries, as the dominant reason for rising emissions (2, 3). [The Kaya* identity decomposes changes in emissions into changes in population, percapita income, the energy intensity of gross domestic product (GDP), and the carbon intensity of energy production. See Steckel et al. (2) for further information.] However, the growing carbon intensity of energy production (i.e., the amount of emissions generated to produce one unit of energy) also has played an important role, and the increased use of coal has been particularly important (2). Coal consumption not only has risen in line with a growing global economy but has outpaced the growth of total energy use. Although coal was central to the industrial revolution (4), it increasingly was superseded by oil and gas in the 20th century. With these recent developments, however, coal again has become the most important source of energy-related emissions on the global scale (Fig. 1B).The Intergovernmental Panel on Climate Change (IPCC) Fifth Assessment Report (5) identifies the replacement of coalfired power plants by less carbon-intensive energy technologies as one of the most cost-efficient options...

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Section: Discussionmentioning

confidence: 99%

Drivers for the renaissance of coal

Steckel

Edenhofer

Jakob

2015

Proc. Natl. Acad. Sci. U.S.A.

Self Cite

115

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“…We shall refer to this as the monopsony effect. It also occurs in the model of Franks et al (2015). Moreover, they show how in the absence of cooperation among buyers, unilateral climate policy in the form of carbon pricing allows governments to appropriate part of the rent.…”

Section: Reduced International Tax Competition: Substituting Rent Taxmentioning

confidence: 88%

“…In this international setting, taxation of fossil resources is preferable to capital taxation for three related reasons (Franks et al, 2015):…”

Section: Reduced International Tax Competition: Substituting Rent Taxmentioning

confidence: 99%

“…Franks et al (2015) exemplify this in a model of a global economy in which several regions compete for mobile capital and have to import fossil resources from an exporting region. They discuss two assumptions about the strategic behavior of the governments of the importing and exporting countries explicitly.…”

Section: Reduced International Tax Competition: Substituting Rent Taxmentioning

confidence: 99%

“…Considering the environmental effects, Franks et al (2015) find that an increase in both the buyers and the sellers taxes increases the consumer price and thus decreases the amount of resources sold. A green paradox, as brought up by Sinn (2008), does not occur.…”

Section: Reduced International Tax Competition: Substituting Rent Taxmentioning

confidence: 99%

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A Public Finance Perspective on Climate Policy: Six Interactions That May Enhance Welfare

et al. 2015

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Climate change economics mostly neglects sizeable interactions of carbon pricing with other fiscal policy instruments. Conversely, public finance typically overlooks the effects of future decarbonization efforts when devising instruments for the major goals of fiscal policy. We argue that such a compartmentalisation is undesirable: policy design taking into account such interdependencies may enhance welfare and change the distribution of mitigation costs within and across generations. This claim is substantiated by analyzing six interactions between climate policy and public finance that are insufficiently explored in current research: (i) reduced tax competition in an open economy, (ii) portfolio effects induced through climate policy, (iii) restructuring public spending, (iv) revenue recycling for productive public investment, (v) greater intragenerational equity through appropriate revenue recycling and (vi) intergenerational Pareto-improvements through intertemporal transfers. We thereby structure the hitherto identified interactions between climate change mitigation and public finance and show that jointly considering carbon pricing and fiscal policy is legitimate and mandatory for sound policy appraisal.JEL classification: B41, H21, H23, H54, H60, Q54

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Climate policies and nationally determined contributions: reconciling the needed ambition with the political economy

Vogt-Schilb

Hallegatte

2017

WIREs Energy & Environment

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Why Finance Ministers Favor Carbon Taxes, Even If They Do Not Take Climate Change into Account

Cited by 14 publications

References 49 publications

Drivers for the renaissance of coal

Drivers for the renaissance of coal

A Public Finance Perspective on Climate Policy: Six Interactions That May Enhance Welfare

Climate policies and nationally determined contributions: reconciling the needed ambition with the political economy

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