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Second-best carbon taxation in the global economy: the green paradox and carbon leakage revisited

Abstract:

Acceleration of global warming resulting from a future carbon tax is large if the price elasticities of oil demand are large and that of oil supply is small. The fall in the world interest rate weakens this weak Green Paradox effect, especially if intertemporal substitution is weak. Still, social damages from greenhouse gases drop if the fall in oil supply and cumulative emissions is strong enough. If the current carbon tax is set too low, the second-best future carbon tax is set below the fi...

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Publication status:
Published

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Publisher:
University of Oxford
Series:
OxCarre Papers
Publication date:
2015-03-10
Paper number:
157

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