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Norwegian climate policy reforms in the presence of an international quota market

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  • Bjertnæs, Geir H.
  • Tsygankova, Marina
  • Martinsen, Thomas

Abstract

This study shows that the second-best optimal difference between tax rates on goods that generate greenhouse gas emissions and non-polluting goods is equal to the quota price plus a Ramsey tax on the quota price when emission quotas are traded between governments and the price elasticity of these goods is identical. This tax difference exceeds the second-best optimal difference between tax rates on goods that generate a negative externality equivalent to the quota price and non-polluting goods. Model simulations show that a unilateral increase in emission tax to above the international quota price generates a welfare gain for Norway. Model simulations also show that an international tax/quota price increase generates a welfare gain (loss) for Norway if Norwegian imports of oil become substantial (marginal) in the long run.

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  • Bjertnæs, Geir H. & Tsygankova, Marina & Martinsen, Thomas, 2013. "Norwegian climate policy reforms in the presence of an international quota market," Energy Economics, Elsevier, vol. 39(C), pages 147-158.
    • Handle: RePEc:eee:eneeco:v:39:y:2013:i:c:p:147-158
    DOI: 10.1016/j.eneco.2013.05.001
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    Cited by:

    1. Geir H. M. Bjertnaes, 2019. "Efficient Taxation of Fuel and Road Use," CESifo Working Paper Series 8019, CESifo.
    2. Geir H. M. Bjertnæs, 2017. "The efficient combination of taxes on fuel and vehicles," Discussion Papers 867, Statistics Norway, Research Department.
    3. Geir H. M. Bjertnæs, 2021. "Taxation of fuel and vehicles when emissions are constrained," Discussion Papers 949, Statistics Norway, Research Department.
    4. Bjertnæs, Geir H.M., 2023. "Taxation of fuel and vehicles when emissions are constrained," Energy Economics, Elsevier, vol. 128(C).
    5. Geir H. M. Bjertnæs, 2019. "Efficient taxation of fuel and road use," Discussion Papers 905, Statistics Norway, Research Department.
    6. Geir H. M. Bjertnaes, 2017. "The Efficient Combination of Taxes on Fuel and Vehicles," CESifo Working Paper Series 6789, CESifo.

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    More about this item

    Keywords

    Optimal taxation; Double dividend; Emissions;
    All these keywords.

    JEL classification:

    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy

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