Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/236636 
Year of Publication: 
2021
Series/Report no.: 
ZEW Discussion Papers No. 21-060
Publisher: 
ZEW - Leibniz-Zentrum für Europäische Wirtschaftsforschung, Mannheim
Abstract: 
Economists tend to view a uniform emissions price as the most cost-effective approach to reducing greenhouse gas emissions. This paper offers a different view, focusing on economies where society values the well-being of future generations more than private actors. Employing analytical and numerical general equilibrium models, we show that a uniform carbon price is efficient only under restrictive assumptions about technology homogeneity and intertemporal decision-making. Non-uniform pricing spurs capital accumulation and benefits future generations. Depending on sectoral heterogeneity in the substitutability between capital and energy inputs, we find that optimal carbon prices differ widely across sectors and yield substantial welfare gains relative to uniform pricing.
Subjects: 
Sectoral Carbon Pricing
Differentiated Carbon Taxes
Climate Policy
Social Discounting
JEL: 
Q54
Q58
Q43
H23
C61
Document Type: 
Working Paper

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