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Even though carbon pricing is widely accepted as the most efficient policy instrument for climate change mitigation, it has been severely held back by a lack of public support. Building on research in behavioural sciences, we propose a revenue recycling scheme that aims to foster public support for carbon taxes. The scheme has two main strengths: (i) it may allow the implementatin of carbon taxes with higher tax rates than those currently prevailing in most jurisdictions; (ii) it relies on a number of accessible technologies, and thus it can be implemented in a wide variety of settings, both in urban and rural areas of developing and developed countries.

To finance the transition to low-carbon economies required to mitigate climate change, countries are increasingly using a combination of carbon pricing and green bonds. This paper studies the reasoning behind such policy mixes and the economic interaction effects that result from these different policy instruments. We model these interactions using an intertemporal model, related to Sachs (2015), which proposes a burden sharing between current and future generations. The issuance of green bonds helps to enable immediate investment in climate change mitigation and adaptation, and the bonds would be repaid by future generations in such a way that those who benefit from reduced future environmental damage share in the burden of financing mitigation efforts undertaken today. We examine the effects of combining green bonds and carbon pricing in a three-phase model. We are using a numerical solution procedure which allows for finite-horizon solutions and phase changes. We show that green bonds perform better when they are combined with carbon pricing. Our proposed policy option appears to be politically more feasible than a green transition based only on carbon pricing and is more prudent for debt sustainability than a green transition that relies overly on green bonds. Zur Finanzierung des Klimaschutzes verwenden Länder zunehmend eine Kombination von CO2-Bepreisung und grünen Anleihen. Dieser Artikel analysiert die Gründe für einen solchen Politikmix sowie die Interaktionseffekte dieser Instrumente. Wir modellieren die Interaktionseffekte in einem intertemporalen Modell, das sich auf Sachs (2015) bezieht und eine Lastenverteilung zwischen gegenwärtigen und zukünftigen Generationen vorsieht. Die Ausgabe von grünen Anleihen trägt dazu bei, sofortige Investitionen in den Klimaschutz und die Anpassung an den Klimawandel zu ermöglichen, und die Anleihen würden von zukünftigen Generationen so zurückgezahlt, dass diejenigen, die von geringeren zukünftigen Umweltschäden profitieren, an der Last der Finanzierung der heute unternommenen Klimaschutzmaßnahmen beteiligt sind. Wir untersuchen die Auswirkungen der Kombination von grünen Anleihen und CO2-Steuern in einem Drei-Phasen-Modell. Wir verwenden ein numerisches Lösungsverfahren, das endliche Lösungen und Phasenwechsel ermöglicht. Wir zeigen, dass grüne Anleihen besser abschneiden, wenn sie mit der CO2-Besteuerung kombiniert werden. Unsere vorgeschlagene politische Option scheint politisch machbarer zu sein als ein grüner Übergang, der ausschließlich auf CO2-Steuern basiert und für die Nachhaltigkeit der Verschuldung vorsichtiger ist als eine Klimapolitik, der zu sehr auf grüne Anleihen setzt.

Many academics and policymakers agree that implicit tax subsidies for maritime fuels — which are currently granted around the world — are inefficient, but that their abolishment requires a unanimous international agreement. Such an agreement is deemed indispensable because any unilateral action would be impossible due to massive tax competition in this industry, competitiveness effects and the legal limits on regulating an industry operating mostly in international waters, thus outside of any state’s jurisdiction. However, an international agreement to solve these problems has proven impossible to reach, thus resulting in the conservation of the status quo. To break this deadlock, we propose a mechanism whereby a small coalition of countries, to start with, can abolish these implicit tax subsidies even in the absence of an international agreement. This incentive-compatible scheme solves the above-mentioned issues. The mechanism is furthermore designed to avoid locking in a sub-global scheme. Instead, it has the potential to contribute to unlocking the gridlock in negotiations over a global agreement on this matter.

Although the existing literature identifies a fuel levy imposed by means of a global agreement as the most efficient policy for carbon pricing in the maritime sector, scholars and policy makers debate the possibility for regional measures to be introduced in case a global agreement cannot be achieved. This debate has highlighted several economic, legal, and political challenges that the implementation of an efficient and effective regional scheme would have to face. This paper compares the relative performance of various regional measures for carbon pricing based on the following criteria: jurisdictional basis, data availability, environmental effectiveness and avoidance strategies, impact on competitiveness, differentiation for developing countries, and incentives for reaching a global agreement. The main finding is that, if carefully designed, a cargo-based measure that covers the emissions released throughout the whole voyage to the cargo destination presents various advantages compared with other carbon pricing schemes. These advantages have been largely ignored in the literature.

There is a lively debate among scholars and policymakers on whether either consumers or producers should be seen as responsible for pollution caused in the production and consumption of traded goods. In this article, we argue that, in conformity with intuitive conceptions of causation, the economic incidence of a Pigouvian tax can be seen as a measure of the relative contribution to pollution of consumers and producers. Taking this perspective on the polluter-pays principle can help increase ambition in climate change action because it reduces the relevance of the question “Who is the polluter?” in climate change negotiations and enables a focus instead on the issue of “What can be done?” to reduce carbon emissions.

To finance the transition to low-carbon economies required to mitigate climate change, countries are increasingly using a combination of carbon pricing and green bonds. This paper studies the reasoning behind such policy mixes and the economic interaction effects that result from these different policy instruments. The paper models these interactions using an inter-temporal model that proposes burden sharing between current and future generations. The issuance of green bonds helps to enable immediate investment in climate change mitigation and adaptation, and the bonds would be repaid by future generations in such a way that those who benefit from reduced future environmental damage share in the burden of financing the mitigation efforts undertaken today. The paper examines the effects of combining green bonds and carbon pricing in a three-phase model and uses a numerical solution procedure that allows for finite-horizon solutions and phase changes. The paper shows that green bonds perform better when they are combined with carbon pricing. The proposed policy option appears to be politically more feasible than a green transition based only on carbon pricing, and it is more prudent for debt sustainability than a green transition that relies overly on green bonds.

On the basis of the environmental tax literature, this article recommends a system of upstream taxes on fossil fuels, combined with refunds for downstream emissions capture, to reduce carbon and local pollution emissions. Motor fuel taxes should also account for congestion and other externalities associated with vehicle use, at least until mileage-based taxes are widely introduced. An examination of existing energy/environmental tax systems in Germany, Sweden, Turkey, and Vietnam suggests that there is substantial scope for policy reform. Policy options include harmonizing taxes for pollution content across different fuels and end users, better aligning tax rates with (albeit crude) values for externalities, and scaling back excise taxes on vehicle ownership and electricity use that are redundant (on environmental grounds) in the presence of more targeted taxes.

Many developed countries have the declared objective of supporting forest sustainability around the globe, but the world’s most important forests are, in fact, outside their jurisdictions. Actions to protect these forests are therefore constrained by the legal problem of extraterritoriality. To legally act outside their borders, developed countries have supported voluntary certificates on production practices and price-based instruments, but, unfortunately, neither instrument reached beyond niche market shares, administration and compliance costs were high, the environmental gains variable, and the two types of instruments work alongside each other without much synergies.In this paper, we use a Law and Economics methodology to develop a mechanism design that integrates forestry certificates with price-based instruments, in a way that exploits synergies, and provides dynamic incentives for sustainable use of forests while keeping down the costs of compliance and administration. It is a mechanism that satisfies legal extraterritoriality constraints while nevertheless allowing countries to act outside their borders. The mechanism consists of a tax imposed by a timber-importing country on a default assumption regarding the sustainability of the timber, combined with a tax discount that is provided on proof that the sustainability was higher than assumed. The proof is established by showing a sustainability certificate to the customs authority when the timber is imported.This Feebate mechanism reduces a range of standard problems in the literatures on certification and taxation of overseas forestry, such as the problems of threshold costs, free-riding and consumer recognition in markets with competing sustainability certificates, and the problem to compute efficient Pigouvian tax rates in a sector marked by data unavailability. We show that a combination of price-based instruments with certificates can lead to greater sustainability of timber production than each of the instruments alone, without infringing the sovereignty of nations in the South in an extraterritorial manner.

Much evidence has been presented that legal institutions, and particularly property rights, cause economic growth. Yet, precisely for those countries with the most urgent need for development, we know less about the direction of causation and the functional form of the association between the strength of legal property rights and per-capita incomes. A seminal work in this literature, by Acemoglu, Johnson and Robinson (2000), provides optimistic outlooks, whereby also the Least Developed Countries could grow out of poverty if they implemented strong legal property rights.This paper challenges two of Acemoglu et al’s findings. First, I derive a range of micro-mechanisms suggesting that the relationship between the strength of legal property rights and output may not be linear as asserted by Acemoglu et al and a number of other scholars and institutions. Instead, these mechanisms imply the existence of a weak relationship between property rights and output in the lowest stages of development and a structural break after early growth. Second, I suggest why the direction of causation may turn around after early development. I confirm the predictions from my analysis of those mechanisms with non-parametric, instrumented regressions. My results hold not only for Acemoglu’s dataset but are robust for alternative specifications of property rights. I use four different datasets that employ different methodologies for measuring formal property rights protection and with each of them my theoretical predictions are empirically confirmed. Both predictions also hold true when interacting quantifications of property law and contract law, and whether or not the data is instrumented.Institutional reforms, and particularly reforms to property rights, have been advocated as a panacea in development policy of recent years, for example by the World Bank. The Acemoglu et al (2000) study has continuously been cited as one of the main pieces of evidence supporting these policy suggestions. My study shows, however, that the strength of formal property law matters mostly at specific stages of development and not across all countries. One policy does not fit all cases. I show that property law matters greatly for Mid-Income Countries but that it is important not to overestimate its potential for the Least Developed Countries. We must not stop searching for the causes of growth in the earliest stages of development; reforming and enforcing property law alone does not resolve the poorest nations' poverty traps.

Among academics and policymakers, it is generally agreed that implicit tax subsidies for maritime fuels — which are currently granted around the world — are inefficient, but that their abolishment requires a unanimous international agreement. Such an agreement is deemed indispensable because any unilateral action would be impossible due to massive tax competition in this industry, competitiveness effects and the legal limits on regulating an industry operating mostly in international waters, thus outside of any state’s jurisdiction. However, an international agreement to solve these problems has proven impossible to reach, thus resulting in the conservation of the status quo. To break this deadlock, we propose a mechanism whereby a small coalition of countries, to start with, can abolish these implicit tax subsidies even in the absence of an international agreement. The effects of acting without a world-wide agreement are analyzed from an economic perspective, taking into account the current legal framework. The coalition considered in this article focuses on EU member states, although the mechanism is applicable more widely.

This essay discusses (based on a recent IMF study) how developed and developing countries alike might put into practice the principle of 'getting prices right' to address the major externalities from energy. The efficient set of taxes includes charges on fuel use for carbon and local pollution (with credits for emissions capture during combustion) and additional charges on motor fuels for road congestion and accidents (though the latter should transition to distance-based charges). Techniques and data sources for measuring the externalities and corrective taxes by country are discussed. In general, heavy taxes on coal and motor fuels are warranted (though there is substantial cross-country variation in corrective tax rates). For most countries, tax reform could yield considerable fiscal, health, and carbon benefits.

This paper calculates, for the top twenty emitting countries, how much pricing of carbon dioxide (CO2) emissions is in their own national interests due to domestic co-benefits (leaving aside the global climate benefits). On average, nationally efficient prices are substantial, $57.5 per ton of CO2 (for year 2010), reflecting primarily health co-benefits from reduced air pollution at coal plants and, in some cases, reductions in automobile externalities (net of fuel taxes/subsidies). Pricing co-benefits reduces CO2 emissions from the top twenty emitters by 13.5 percent (a 10.8 percent reduction in global emissions). However, co-benefits vary dramatically across countries (e.g., with population exposure to pollution) and differentiated pricing of CO2 emissions therefore yields higher net benefits (by 23 percent) than uniform pricing. Importantly, the efficiency case for pricing carbon’s co-benefits hinges critically on (i) weak prospects for internalizing other externalities through other pricing instruments and (ii) productive use of carbon pricing revenues.

On the basis of the environmental tax literature, this article recommends a system of upstream taxes on fossil fuels, combined with refunds for downstream emissions capture, to reduce carbon and local pollution emissions. Motor fuel taxes should also account for congestion and other externalities associated with vehicle use, at least until mileage-based taxes are widely introduced. An examination of existing energy/environmental tax systems in Germany, Sweden, Turkey, and Vietnam suggests that there is substantial scope for policy reform. Policy options include harmonizing taxes for pollution content across different fuels and end users, better aligning tax rates with (albeit crude) values for externalities, and scaling back excise taxes on vehicle ownership and electricity use that are redundant (on environmental grounds) in the presence of more targeted taxes.

This paper calculates, for the top 20 emitting countries, how much pricing of carbon dioxide (CO2) emissions would be in their own national interests due to domestic co-benefits (leaving aside the global climate benefits). On average, second-best domestic prices are substantial, $57.5 per ton of CO2 (for year 2010), reflecting primarily health co-benefits from reduced air pollution at coal plants and, in some cases, reductions in automobile externalities net of fuel taxes/subsidies. Pricing co-benefits reduces CO2 emissions from the top 20 emitters by 13.5%. However, co-benefits vary dramatically across countries (e.g., with population exposure to pollution) and differentiated pricing of CO2 emissions therefore yields higher net benefits (by 23%) than uniform pricing. Importantly, the efficiency case for pricing carbon’s co-benefits hinges critically on weak prospects (for the foreseeable future) for comprehensive internalization of other externalities through other (more efficient) pricing instruments.