Carbon Taxes and Joint Implementation

32 Pages Posted: 15 Jun 2003

See all articles by Christoph Böhringer

Christoph Böhringer

University of Oldenburg - Economic Policy; Centre for European Economic Research (ZEW)

Klaus Conrad

University of Mannheim - Department of Economics

Andreas Löschel

University of Muenster - Chair of Microeconomics, esp. Energy and Resource Economics

Date Written: 2000


Germany has committed itself to reducing its carbon emissions by 25 percent in 2005 as compared to 1990 emission levels. To achieve this goal, the government has recently launched an environmental tax reform which entails a continuous increase in energy taxes in conjunction with a revenue-neutral cut in non-wage labor costs. This policy is supposed to yield a double dividend, reducing both, the problem of global warming and high unemployment rates. In addition to domestic actions, international treaties on climate protection allow for the supplementary use of flexible instruments to exploit cheaper emission reduction possibilities elsewhere. One concrete option for Germany would be to enter joint implementation with developing countries such as India where Germany pays emission reduction abroad rather than meeting its reduction target solely by domestic action. In this paper, we investigate whether an environmental tax reform cum joint implementation (JI) provides employment and overall efficiency gains as compared to an environmental tax reform stand-alone (ETR). We address this question in the framework of a large-scale general equilibrium model for Germany and India where Germany may undertake joint implementation with the Indian electricity sector. Our main finding is that joint implementation offsets adverse effects of carbon emission constraints on the German economy. JI significantly lowers the level of carbon taxes and thus reduces the total costs of abatement as well as negative effects on labor demand. In addition, JI triggers direct investment demand for energy efficient power plants produced in Germany. This provides positive employment effects and additional income for Germany. For India, joint implementation equips its electricity industry with scarce capital goods leading to a more efficient power production with lower electricity prices for the economy and substantial welfare gains.

Keywords: environmental tax reform, joint implementation, productivity gaps, energy efficiency improvement, computable general equilibrium modeling

JEL Classification: D24, D58, F20, Q25

Suggested Citation

Bohringer, Christoph and Conrad, Klaus and Löschel, Andreas, Carbon Taxes and Joint Implementation (2000). ZEW Discussion Paper No. 00-45, Available at SSRN: or

Christoph Bohringer

University of Oldenburg - Economic Policy ( email )

Centre for European Economic Research (ZEW) ( email )

D-68161 Mannheim
+49 6211235200 (Phone)
+49 6211235226 (Fax)

Klaus Conrad (Contact Author)

University of Mannheim - Department of Economics ( email )

Seminargebaeude A5
68131 Mannheim
+49 621 1811896 (Phone)
+49 621 1811893 (Fax)

Andreas Löschel

University of Muenster - Chair of Microeconomics, esp. Energy and Resource Economics ( email )

Universitätsstr. 14-16
48143 Munster


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