Carbon taxation when climate affects productivity
نویسنده
چکیده
Based on a numerical model where climate change affects productivity, the second-best optimal carbon tax is found to exceed marginal social damage by 53 percent, and " marginal private damage " (aggregate households' marginal willingness to pay) by 73 percent. Annual welfare gains from carbon taxation are estimated at $3.58 billion when marginal damage is $40 per ton; employment also increases. Setting the carbon tax to the Pigouvian rate raises welfare by only $3.17 billion. The seemingly contradictory results in the " tax interaction " literature are shown to arise only when using " marginal private damage " for the case of an amenity externality.
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