Coase, Hotelling and Pigou: The Incidence of a Carbon Tax and Co2 Emissions

61 Pages Posted: 23 Jul 2019

See all articles by Geoffrey M. Heal

Geoffrey M. Heal

Columbia Business School - Finance and Economics; National Bureau of Economic Research (NBER)

Wolfram Schlenker

Columbia University - School of International & Public Affairs (SIPA)

Date Written: July 2019

Abstract

We use field-level cost estimates of all oil and natural gas fields to highlight dynamic aspects of a global carbon tax. Some of the initial reduction in consumption will be offset through higher consumption later on. Only high-cost reserves will be priced out of the market, e.g., at 200 dollars per ton of CO2 cumulative emissions decrease by 4%. The tax incidence initially falls on consumers under a constant tax but eventually becomes negative as the lifetime of the resources is extended. An increasing tax over time reduces the initial incidence on consumers.

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Suggested Citation

Heal, Geoffrey M. and Schlenker, Wolfram, Coase, Hotelling and Pigou: The Incidence of a Carbon Tax and Co2 Emissions (July 2019). NBER Working Paper No. w26086, Available at SSRN: https://ssrn.com/abstract=3423799

Geoffrey M. Heal (Contact Author)

Columbia Business School - Finance and Economics ( email )

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HOME PAGE: http://www.gsb.columbia.edu/faculty/gheal/

National Bureau of Economic Research (NBER)

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Wolfram Schlenker

Columbia University - School of International & Public Affairs (SIPA) ( email )

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New York, NY 10027
United States
2128541806 (Phone)

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