1 Online-Ressource (12 Seiten, 328 KB)
CEPA discussion papers. - Potsdam : Center for Economic Policy Analysis, University of Potsdam, ISSN 2628-653X, ZDB-ID 2969685-9. - Vol. No. 43
Type of publication: Book / Working Paper
Type of publication (narrower categories): Graue Literatur ; Non-commercial literature ; Arbeitspapier ; Working Paper
Language: English
Gesehen am 11.02.2022
Carbon dioxide removal (CDR) moves atmospheric carbon to geological or land-based sinks. In a first-best setting, the optimal use of CDR is achieved by a removal subsidy that equals the optimal carbon tax and marginal damages. We derive second-best subsidies for CDR when no global carbon price exists but a national government implements a unilateral climate policy. We find that the optimal carbon tax differs from an optimal CDR subsidy because of carbon leakage, terms-of-trade and fossil resource rent dynamics. First, the optimal removal subsidy tends to be larger than the carbon tax because of lower supply-side leakage on fossil resource markets. Second, terms-of-trade effects exacerbate this wedge for net resource exporters, implying even larger removal subsidies. Third, the optimal removal subsidy may fall below the carbon tax for resource-poor countries when marginal environmental damages are small.
Other identifiers:
10.25932/publishup-53808 [DOI]
ECONIS - Online Catalogue of the ZBW
Persistent link: https://www.econbiz.de/10013161787