Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/107341 
Year of Publication: 
2015
Series/Report no.: 
CESifo Working Paper No. 5161
Publisher: 
Center for Economic Studies and ifo Institute (CESifo), Munich
Abstract: 
Carbon pricing regulates emission flows and collects rents from underlying fossil resource stocks. The resulting investment shift implies lower climate policy costs and improved welfare if capital is underaccumulated. We prove that under emission trading, such a beneficial macroeconomic portfolio effect between fossil stocks and capital is induced if some permits are auctioned. Alternatively, a carbon tax also induces a portfolio effect, but cannot simultaneously implement a given mitigation path and collect an arbitrary rent share. Finally, treating the right to recurrently receive a share of total emission permits as a tradable asset is formally, but not politically equivalent.
Subjects: 
carbon pricing
resource rent taxation
overlapping generations
capital underaccumulation
JEL: 
E22
H21
H23
Q30
Q54
Document Type: 
Working Paper
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