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Please use this identifier to cite or link to this item: http://purl.umn.edu/249511

Title: Market power rents and climate change mitigation: a rationale for coal taxes?
Authors: Richter, Phillip M.
Mendelevitch, Roman
Jotzo, Frank
Keywords: Export tax
steam coal
supply-side climate policy
carbon leakage
Australia
Mathematical Program with Equilibrium Constraints (MPEC)
JEL Codes: Q48
F13
Q58
Q41
C61
Issue Date: 2017-08
Abstract: In this paper we investigate the introduction of an export tax on steam coal levied by an individual country (Australia), or a group of major exporting countries. The policy motivation would be twofold: generating tax revenues against the background of improved terms-of-trade, while CO2 emissions are reduced. We construct and numerically apply a two-level game consisting of an optimal policy problem at the upper level, and an equilibrium model of the international steam coal market (based on COALMOD-World) at the lower level. We find that a unilaterally introduced Australian export tax on steam coal has little impact on global emissions and may be welfare reducing. On the contrary, a tax jointly levied by a "climate coalition" of major coal exporters may well leave these better off while significantly reducing global CO2 emissions from steam coal by up to 200 Mt CO2 per year. Comparable production-based tax scenarios consistently yield higher tax revenues but may be hard to implement against the opposition of disproportionally affected local stakeholders depending on low domestic coal prices.
URI: http://purl.umn.edu/249511
Institution/Association: Australian National University>Centre for Climate Economics & Policy (CCEP)>Working Papers
Total Pages: 42
Collections:Working Papers

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