Dynamic Climate Policy with Both Strategic and Non-Strategic Agents : Taxes Versus Quantities
This paper studies a dynamic game where each of two large blocs, of fossil fuel importers and exporters respectively, sets either taxes or quotas to exercise power in fossil-fuel markets. The main novel feature is the inclusion of a "fringe&qu...
| Main Authors: | , , |
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| Format: | Policy Research Working Paper |
| Language: | English en_US |
| Published: |
World Bank, Washington, DC
2014
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| Subjects: | |
| Online Access: | http://documents.worldbank.org/curated/en/2013/10/18447749/dynamic-climate-policy-both-strategic-non-strategic-agents-taxes-versus-quantities http://hdl.handle.net/10986/16894 |
| Summary: | This paper studies a dynamic game where
each of two large blocs, of fossil fuel importers and
exporters respectively, sets either taxes or quotas to
exercise power in fossil-fuel markets. The main novel
feature is the inclusion of a "fringe" of non-
strategic (emerging and developing) countries which both
consume and produce fossil fuels. Cumulated emissions over
time from global fossil fuel consumption create climate
damages which are considered by both the strategic importer
and the non-strategic countries. Markov perfect equilibria
are examined under the four combinations of trade policies
and compared with the corresponding static games where
climate damages are given (not stock-related). The main
results are that taxes always dominate quota policies for
both the strategic importer and exporter and that
"fringe"countries bene?t from a tax policy as
compared with a quota policy for the strategic importer, as
the import fuel price then is lower, and the strategic
importer's fuel consumption is also lower, thus causing
fewer climate damages. |
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