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Full-Text Articles in Social and Behavioral Sciences
Negative Leakage, Don Fullerton, Daniel H. Karney, Kathy Baylis
Negative Leakage, Don Fullerton, Daniel H. Karney, Kathy Baylis
Daniel H Karney
Our analytical general equilibrium model solves for effects of a small increase in carbon tax on leakage—the increase in emissions elsewhere. Identical consumers buy two goods using income from endowments that are mobile between sectors. Usually an increase in one sector’s tax raises output price, so consumption shifts to the other good, causing positive leakage. Here, we find a new negative effect not recognized in existing literature: the taxed sector substitutes away from carbon into clean inputs, so it may absorb resources, shrink the other sector, and reduce their emissions. This “abatement resource effect” could offset some or all of …
Multiple Pollutants, Unovered Sectors, And Suboptimal Environmental Policies, Daniel Karney, Don Fullerton
Multiple Pollutants, Unovered Sectors, And Suboptimal Environmental Policies, Daniel Karney, Don Fullerton
Daniel H Karney
In our analytical general equilibrium model where two polluting inputs can be substitutes or complements in production, we study the effects of a tax on one pollutant in two cases: one where both pollutants face taxes and the second where the other pollutant is subject to a permit policy. In each case, we solve for closed-form solutions that highlight important parameters. We demonstrate two important ways that environmental taxes and permits are not equivalent. First, the change in the pollutant facing a tax increase depends on whether the other pollutant is subject to a tax or permit policy. Second, if …