IDEAS home Printed from https://ideas.repec.org/a/bla/ajarec/v64y2020i4p1133-1166.html
   My bibliography  Save this article

Uniform emission taxes, abatement, and spatial disparities

Author

Listed:
  • Hajime Takatsuka

Abstract

This paper examines how a commitment to a common tax on greenhouse gas (GHG) emissions affects spatial distribution of production and welfare between countries. To focus on the long‐term effects of firm relocation, the paper employs a two‐country model of monopolistic competition with a variable abatement technology. In the model, the elasticity of substitution between GHG emissions and the conventional input is a key parameter. If the elasticity of substitution is smaller than one (in the substitutable area), the relative number of firms and the relative welfare in the large country monotonically increase with uniform tax rates. Meanwhile, if the elasticity of substitution is larger than one, they both follow inverted U‐shaped curves in response to tax rates. Nevertheless, for any level of taxes, they both are necessarily higher than those in the case without taxes. This suggests that uniform emission taxes widen international disparities of firm location and welfare.

Suggested Citation

  • Hajime Takatsuka, 2020. "Uniform emission taxes, abatement, and spatial disparities," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 64(4), pages 1133-1166, October.
    • Handle: RePEc:bla:ajarec:v:64:y:2020:i:4:p:1133-1166
    DOI: 10.1111/1467-8489.12397
    as

    Download full text from publisher

    File URL: https://doi.org/10.1111/1467-8489.12397
    Download Restriction: no
    File URL: https://libkey.io/10.1111/1467-8489.12397?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Richard Baldwin & Rikard Forslid & Philippe Martin & Gianmarco Ottaviano & Frederic Robert-Nicoud, 2005. "Economic Geography and Public Policy," Economics Books, Princeton University Press, edition 1, number 7524.
    2. Matthew Ranson & Robert N. Stavins, 2016. "Linkage of greenhouse gas emissions trading systems: learning from experience," Climate Policy, Taylor & Francis Journals, vol. 16(3), pages 284-300, April.
    3. Stephen J. Redding & Esteban Rossi-Hansberg, 2017. "Quantitative Spatial Economics," Annual Review of Economics, Annual Reviews, vol. 9(1), pages 21-58, September.
    4. Markusen James R. & Morey Edward R. & Olewiler Nancy D., 1993. "Environmental Policy when Market Structure and Plant Locations Are Endogenous," Journal of Environmental Economics and Management, Elsevier, vol. 24(1), pages 69-86, January.
    5. Martin L. Weitzman, 2015. "Internalizing the Climate Externality: Can a Uniform Price Commitment Help?," Economics of Energy & Environmental Policy, International Association for Energy Economics, vol. 0(Number 2).
    6. Michael Hoel, 1993. "Harmonization of carbon taxes in international climate agreements," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 3(3), pages 221-231, June.
    7. Forslid, Rikard & Okubo, Toshihiro & Ulltveit-Moe, Karen Helene, 2018. "Why are firms that export cleaner? International trade, abatement and environmental emissions," Journal of Environmental Economics and Management, Elsevier, vol. 91(C), pages 166-183.
    8. Parry, Ian W. H., 2004. "Are emissions permits regressive?," Journal of Environmental Economics and Management, Elsevier, vol. 47(2), pages 364-387, March.
    9. Peter Cramton & Axel Ockenfels & Jean Tirole, 2017. "Policy Brief—Translating the Collective Climate Goal Into a Common Climate Commitment," Review of Environmental Economics and Policy, Association of Environmental and Resource Economists, vol. 11(1), pages 165-171.
    10. Snorre Kverndokk, 1993. "Global CO2 Agreements: A Cost-Effective Approach," The Energy Journal, , vol. 14(2), pages 91-122, April.
    11. Dellink, Rob & van Ierland, Ekko, 2006. "Pollution abatement in the Netherlands: A dynamic applied general equilibrium assessment," Journal of Policy Modeling, Elsevier, vol. 28(2), pages 207-221, February.
    12. Zeng, Dao-Zhi & Zhao, Laixun, 2009. "Pollution havens and industrial agglomeration," Journal of Environmental Economics and Management, Elsevier, vol. 58(2), pages 141-153, September.
    13. Christian Flachsland & Robert Marschinski & Ottmar Edenhofer, 2009. "To link or not to link: benefits and disadvantages of linking cap-and-trade systems," Climate Policy, Taylor & Francis Journals, vol. 9(4), pages 358-372, July.
    14. Markusen, James R. & Morey, Edward R. & Olewiler, Nancy, 1995. "Competition in regional environmental policies when plant locations are endogenous," Journal of Public Economics, Elsevier, vol. 56(1), pages 55-77, January.
    15. Martin, Philippe & Rogers, Carol Ann, 1995. "Industrial location and public infrastructure," Journal of International Economics, Elsevier, vol. 39(3-4), pages 335-351, November.
    16. Hajime Takatsuka & Dao-Zhi Zeng, 2012. "Mobile capital and the home market effect," Canadian Journal of Economics, Canadian Economics Association, vol. 45(3), pages 1062-1082, August.
    17. Metcalf, Gilbert E., 1999. "A Distributional Analysis of Green Tax Reforms," National Tax Journal, National Tax Association;National Tax Journal, vol. 52(4), pages 655-682, December.
    18. Axel Ockenfels & Gary E. Bolton, 2000. "ERC: A Theory of Equity, Reciprocity, and Competition," American Economic Review, American Economic Association, vol. 90(1), pages 166-193, March.
    19. Cremer, Helmuth & Gahvari, Firouz & Ladoux, Norbert, 2003. "Environmental taxes with heterogeneous consumers: an application to energy consumption in France," Journal of Public Economics, Elsevier, vol. 87(12), pages 2791-2815, December.
    20. Krugman, Paul, 1980. "Scale Economies, Product Differentiation, and the Pattern of Trade," American Economic Review, American Economic Association, vol. 70(5), pages 950-959, December.
    21. Peter Cramton, Axel Ockenfels, and Steven Stoft, 2015. "An International Carbon-Price Commitment Promotes Cooperation," Economics of Energy & Environmental Policy, International Association for Energy Economics, vol. 0(Number 2).
    22. Gerlagh, Reyer & Dellink, Rob & Hofkes, Marjan & Verbruggen, Harmen, 2002. "A measure of sustainable national income for the Netherlands," Ecological Economics, Elsevier, vol. 41(1), pages 157-174, April.
    23. Joseph E. Stiglitz, 2015. "Overcoming the Copenhagen Failure with Flexible Commitments," Economics of Energy & Environmental Policy, International Association for Energy Economics, vol. 0(Number 2).
    24. Jota Ishikawa & Kazuharu Kiyono, 2006. "Greenhouse-Gas Emission Controls In An Open Economy," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 47(2), pages 431-450, May.
    25. Dixit, Avinash K & Stiglitz, Joseph E, 1977. "Monopolistic Competition and Optimum Product Diversity," American Economic Review, American Economic Association, vol. 67(3), pages 297-308, June.
    26. Jota Ishikawa & Toshihiro Okubo, 2017. "Greenhouse-Gas Emission Controls and Firm Locations in North–South Trade," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 67(4), pages 637-660, August.
    27. Martin L. Weitzman, 2014. "Can Negotiating a Uniform Carbon Price Help to Internalize the Global Warming Externality?," Journal of the Association of Environmental and Resource Economists, University of Chicago Press, vol. 1(1), pages 29-49.
    28. Christian Gollier and Jean Tirole, 2015. "Negotiating effective institutions against climate change," Economics of Energy & Environmental Policy, International Association for Energy Economics, vol. 0(Number 2).
    29. Dellink, Rob & Hofkes, Marjan & van Ierland, Ekko & Verbruggen, Harmen, 2004. "Dynamic modelling of pollution abatement in a CGE framework," Economic Modelling, Elsevier, vol. 21(6), pages 965-989, December.
    30. Buob, Seraina & Stephan, Gunter, 2011. "To mitigate or to adapt: How to confront global climate change," European Journal of Political Economy, Elsevier, vol. 27(1), pages 1-16, March.
    31. Adam Rose & Dan Wei & Noah Miller & Toon Vandyck & Christian Flachsland, 2018. "Policy Brief—Achieving Paris Climate Agreement Pledges: Alternative Designs for Linking Emissions Trading Systems," Review of Environmental Economics and Policy, Association of Environmental and Resource Economists, vol. 12(1), pages 170-182.
    32. Metcalf, Gilbert E., 1999. "A Distributional Analysis of Green Tax Reforms," National Tax Journal, National Tax Association, vol. 52(n. 4), pages 655-82, December.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Takatsuka, Hajime, 2020. "Uniform emission taxes, abatement, and spatial disparities," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 64(04), January.
    2. Haitao Cheng, 2023. "Consumption pollution and taxes with endogenous firm locations and different market sizes," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 30(6), pages 1601-1632, December.
    3. Cheng, Haitao, 2021. "Trade, Consumption Pollution and Tax," Discussion paper series HIAS-E-106, Hitotsubashi Institute for Advanced Study, Hitotsubashi University.
    4. Jota Ishikawa & Toshihiro Okubo, 2017. "Greenhouse-Gas Emission Controls and Firm Locations in North–South Trade," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 67(4), pages 637-660, August.
    5. Takatsuka, Hajime & Zeng, Dao-Zhi, 2016. "Nontariff protection without an outside good," International Review of Economics & Finance, Elsevier, vol. 41(C), pages 65-78.
    6. Stef Proost & Jacques-François Thisse, 2019. "What Can Be Learned from Spatial Economics?," Journal of Economic Literature, American Economic Association, vol. 57(3), pages 575-643, September.
    7. Zeng, Dao-Zhi & Zhao, Laixun, 2009. "Pollution havens and industrial agglomeration," Journal of Environmental Economics and Management, Elsevier, vol. 58(2), pages 141-153, September.
    8. Cheng, Haitao, 2024. "Domestic versus international emissions trading with capital mobility," Resource and Energy Economics, Elsevier, vol. 77(C).
    9. Jota Ishikawa & Toshihiro Okubo, 2008. "Greenhouse-gas Emission Controls and International Carbon Leakage through Trade Liberalization," Global COE Hi-Stat Discussion Paper Series gd08-013, Institute of Economic Research, Hitotsubashi University.
    10. Haitao CHENG & ISHIKAWA Jota, 2021. "Carbon Tax and Border Tax Adjustments with Technology and Location Choices," Discussion papers 21030, Research Institute of Economy, Trade and Industry (RIETI).
    11. José M. Gaspar, 2018. "A prospective review on New Economic Geography," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 61(2), pages 237-272, September.
    12. Yoshihiro Hamaguchi, 2022. "Effect of environmental tax evasion on pollution havens within the EU’s dual regulation system," SN Business & Economics, Springer, vol. 2(12), pages 1-25, December.
    13. Peter Cramton, Axel Ockenfels, and Steven Stoft, 2015. "An International Carbon-Price Commitment Promotes Cooperation," Economics of Energy & Environmental Policy, International Association for Energy Economics, vol. 0(Number 2).
    14. Carl Gaigné & Jacques-François Thisse, 2013. "New Economic Geography and the City," Working Papers SMART 13-02, INRAE UMR SMART.
    15. Rauscher, Michael, 2009. "Concentration, separation, and dispersion: Economic geography and the environment," Thuenen-Series of Applied Economic Theory 109, University of Rostock, Institute of Economics.
    16. Fouquet, Roger & O'Garra, Tanya, 2022. "In pursuit of progressive and effective climate policies: Comparing an air travel carbon tax and a frequent flyer levy," Energy Policy, Elsevier, vol. 171(C).
    17. Hajime Takatsuka & Dao‐Zhi Zeng, 2012. "Mobile capital and the home market effect," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 45(3), pages 1062-1082, August.
    18. Yoshihiro Hamaguchi, 2020. "Do pollution havens restrict tourism-led growth? Achieving sustainable tourism via a mix of environmental and tourism policies," Tourism Economics, , vol. 26(7), pages 1175-1196, November.
    19. repec:wsr:wpaper:y:2013:i:124 is not listed on IDEAS
    20. Juan Labraga, 2009. "Política Comercial y Política de Infraestructura en el MERCOSUR," IDB Publications (Working Papers) 9328, Inter-American Development Bank.
    21. Fullerton, Don & Metcalf, Gilbert E., 2002. "Tax incidence," Handbook of Public Economics, in: A. J. Auerbach & M. Feldstein (ed.), Handbook of Public Economics, edition 1, volume 4, chapter 26, pages 1787-1872, Elsevier.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bla:ajarec:v:64:y:2020:i:4:p:1133-1166. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: https://edirc.repec.org/data/aaresea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.