The Private Provision of International Impure Public Goods: The Case of Climate Policy

Basque Centre for Climate Change Working Paper No. 2011-09

33 Pages Posted: 16 Sep 2011

See all articles by Martin Altemeyer-Bartscher

Martin Altemeyer-Bartscher

Chemnitz University of Technology (CUT)

Anil Markandya

Basque Centre for Climate Change (BC3); University of Bath

Dirk T. G. Rübbelke

Technische Universität Bergakademie Freiberg

Date Written: September 16, 2011

Abstract

We discuss a tax-transfer scheme that aims at addressing the underprovision problem associated with the private supply of international public goods and at bringing about Pareto optimal allocations internationally. In particular, we consider the example of the global public good ‘climate stabilization’, both in an analytical and a numerical simulation model. The proposed scheme levies Pigouvian taxes globally, while international sidepayments are employed in order to provide incentives to individual countries for not taking a free-ride from the international Pigouvian tax scheme. The side-payments, in turn, are financed via the environmental taxes. As a distinctive feature we take into account ancillary benefits that may be associated with local public characteristics of climate policy. We determine the positive impact that ancillary effects may exert on the scope for financing side-payments via environmental taxation. A particular attractive feature of ancillary benefits is that they arise shortly after the implementation of climate policies and therefore yield an almost immediate payback of investments in abatement efforts. Especially in times of high public debt levels, long periods of amortization would tend to reduce political support for investments in climate policy.

Keywords: ancillary benefits, climate policy, impure public goods, environmental taxation, international transfers

JEL Classification: Q38, H23, D62

Suggested Citation

Altemeyer-Bartscher, Martin and Markandya, Anil and Rübbelke, Dirk T. G., The Private Provision of International Impure Public Goods: The Case of Climate Policy (September 16, 2011). Basque Centre for Climate Change Working Paper No. 2011-09 . Available at SSRN: https://ssrn.com/abstract=1928484 or http://dx.doi.org/10.2139/ssrn.1928484

Martin Altemeyer-Bartscher (Contact Author)

Chemnitz University of Technology (CUT) ( email )

Chemnitz
Germany

Anil Markandya

Basque Centre for Climate Change (BC3)

Gran Vía 35-2
Bilbao, Vizcaya 48009
Spain

University of Bath ( email )

Claverton Down
Bath, BA2 7AY
United Kingdom

Dirk T. G. Rübbelke

Technische Universität Bergakademie Freiberg ( email )

Freiberg, 09599
Germany

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