The effects of two environmental policy options for the reduction of pollution emissions, i.e. taxes and non-tradable quotas, are analyzed. In contrast to the prior literature this work endogenously takes into account the level of emissions before and after the adoption of the new environmental...

Economic thought on climate policy as an instance of environmental regulation is strongly influenced by the principle of a uniform carbon price. Economists acknowledge that this principle breaks down in a second-best world with other distortions, such as taxes and market power in domestic and...

We develop a model of optimal carbon taxation and redistribution taking into account horizontal equity concerns by considering heterogeneous energy efficiencies. By deriving first- and secondbest rules for policy instruments including carbon taxes, transfers and energy subsidies, we then...

At what rate should a government price carbon emissions? This paper analyzes optimal carbon pricing while taking into account interactions with the taxation of labor and capital income. In an otherwise standard climate-economy model, the policy maker has to resort to a distortionary tax on labor...

Energy system and power market models refrain from distinguishing between private and social discount rates. We devise a strategy to account for diverging private and social discount rates in intertemporal optimization frameworks, resulting in an optimal carbon tax above the marginal damage when...

We develop a model of optimal carbon taxation and redistribution taking into account horizontal equity concerns by considering heterogeneous energy efficiencies. By deriving first- and second-best rules for policy instruments including carbon taxes, transfers and energy subsidies, we then...

We show how corrective taxation can improve the efficiency properties of tradable quotas systems affected by market power. Indeed, when only a subset of firms are price takers while the remaining firms enjoy market power, we show that, if the regulator sets an ad hoc taxation on firms' traded...

We consider a global externality of resource use, with the example of greenhouse gas emissions from fossil fuels. A region concerned about climate change may reduce its fuel deposit offer, reduce fuel consumption, and withdraw investments into global fuel extraction. We study leakage rates and...

We analyze how a country pursuing a unilateral climate policy may contribute to a reduction in global CO2 emissions in a cost-effective way. To do so its system of energy taxes and subsidies must account for leakage of emissions from the domestic to the foreign economy. We focus on leakage...