We demonstrate that the carbon tax imposed by the Canadian province of British Columbia caused a decline in short-run gasoline demand that is significantly greater than would be expected from an equivalent increase in the market price of gasoline. That the carbon tax is more salient, or yields a larger change in demand than equivalent market price movements, is robust to a range of specificatio...

This paper postulates the conceptually useful allegory of a futuristic “World Climate Assembly” (WCA) that votes for a single worldwide price on carbon emissions via the basic democratic principle of one-person one-vote majority rule. If this WCA framework can be accepted in the first place, then voting on a single internationallybinding minimum carbon price (the proceeds from which are domesti...

a Department of Energy Economics, School of Economics, Renmin University, Beijing 100872, China b Center for Ecological Economy Research, Zhejiang Sci-Tech University, Hangzhou 310018, China c Centre for European Economic Research (ZEW), 68161 Mannheim, Germany d Alfred-Weber-Institute for Economics, Heidelberg University, 69115 Heidelberg, Germany e School of Public Policy and Management, Tsin...

This paper studies a social planner who chooses countries’ carbon prices so as to maximize global welfare. Product markets are characterized by firm heterogeneity, market power, and international trade. Because of the market-power distortion, planner’s optimal policy is second-best. The main insight that may be highly asymmetric: zero in some countries above cost with relatively dirty productio...

This paper examines the effects of firm-level innovation in carbon-abatement technologies on optimal cap-and-trade schemes with and without price controls. We characterize optimal cap-and-trade regulation with price cap and price floor, and compare it to the special cases of pure taxation and simple emissions cap. Innovation shifts the tradeoff between priceand quantity-based instruments toward...

Conventional wisdom holds that the efficient way to achieve a climate target is to price carbon emissions at a rate that increases exponentially. We show that an exponentially increasing tax on carbon emissions is not efficient when climate targets are expressed in terms of temperature. In that case, the least-cost policy path deviates from an exponential trajectory in order to take advantage o...

Uncertainty about long-term climate policy is a major driving force in the evolution of the carbon market price. Since this price enters the investment decision process of regulated firms, this uncertainty increases the cost of capital for investors and might deter investments into new technologies at the company level. We apply a real options-based approach to assess the impact of climate chan...

Abstract: Accurate forecasting of carbon price is important and fundamental for anticipating the changing trends of the energy market, and, thus, to provide a valid reference for establishing power industry policy. However, carbon price forecasting is complicated owing to the nonlinear and non-stationary characteristics of carbon prices. In this paper, a combined forecasting model based on vari...