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Complementary taxation of carbon emissions and local air pollution

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  • Mier, Mathias
  • Adelowo, Jacqueline
  • Weissbart, Christoph

Abstract

Current decarbonization policies neglect damages from local air pollutants. We analyze the trade-off between complementary taxation of carbon emissions and local air pollution. We quantify results for the European power market until 2050. Taxing only air pollution results in system cost of 6,475 billion € and fosters nuclear deployment. Additional external cost accumulate to 5,890 billion €. Taxing only carbon yields system (external) cost of 8,263 (717) billion € and promotes carbon-capture-and-storage deployment. Taxing both yields (external) cost of 7,697 (1,118) billion €. Moderate carbon taxation can be complementary to a primary policy of air pollution abatement. On the contrary, a primary policy of decarbonization stands in trade-off with air pollution abatement in the long-term.

Suggested Citation

  • Mier, Mathias & Adelowo, Jacqueline & Weissbart, Christoph, 2024. "Complementary taxation of carbon emissions and local air pollution," Energy Economics, Elsevier, vol. 132(C).
    • Handle: RePEc:eee:eneeco:v:132:y:2024:i:c:s0140988324001683
    DOI: 10.1016/j.eneco.2024.107460
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    More about this item

    Keywords

    Taxation; External cost; Air pollution; Carbon emission; Externality; Energy system model; Power market model; Decarbonization;
    All these keywords.

    JEL classification:

    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • H43 - Public Economics - - Publicly Provided Goods - - - Project Evaluation; Social Discount Rate
    • L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities

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