Global carbon price asymmetry
Published version
Peer-reviewed
Repository URI
Repository DOI
Change log
Authors
Ritz, RA
Abstract
This paper studies a social planner who chooses countries’ carbon prices so as to maximize global welfare. Product markets are characterized by firm heterogeneity, market power, and international trade. Because of the market-power distortion, the planner’s optimal policy is second-best. The main insight is that optimal carbon prices may be highly asymmetric: zero in some countries and above the social cost of carbon in countries with relatively dirty production. This result obtains even though a uniform global carbon price is always successful at reducing countries’ emissions. Competition policy that mitigates market power may enable stronger climate action.
Description
Keywords
38 Economics, 3801 Applied Economics, 3802 Econometrics, 3803 Economic Theory, 13 Climate Action
Journal Title
Journal of Environmental Economics and Management
Conference Name
Journal ISSN
0095-0696
Volume Title
Publisher
Elsevier