Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/103542
Authors: 
Heindl, Peter
Wood, Peter J.
Jotzo, Frank
Year of Publication: 
2014
Series/Report no.: 
ZEW Discussion Papers 14-086
Abstract: 
This paper examines the effects of combining an international cap-and-trade scheme with national carbon taxes. We consider a two-country stochastic partial equilibrium model with log-normally distributed uncertainty. The situation is analogous to the situation where European countries impose national carbon taxes in addition to the EU emissions trading. The allowance price in the joint cap-and-trade scheme depends on the tax rate, the relative size of countries and abatement options, the magnitude of uncertainty, and correlation of abatement costs. In most cases, the additional tax will not lead to additional production of the public good beyond the fixed targets. The additional tax results in higher costs of abatement to the country introducing the additional tax, and higher costs overall.
Subjects: 
prices vs. quantities
linking
cap-and-trade
carbon tax
uncertainty
EU Emissions Trading Scheme
JEL: 
Q53
H23
H41
Document Type: 
Working Paper

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