Carbon Tax and OPEC’s Rents Under a Ceiling Constraint

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• Article - The Scandinavian Journal of Economics
• Working Paper PSE-Ecole d’économie de Paris

Abstract

We study the Markov-perfect Nash equilibrium (MPNE) of a game between oil-importing countries, who seek to maintain the atmospheric carbon concentration under a given ceiling, and oil-exporting countries. The oil-importing countries set a carbon tax and the oil-exporting countries control the producer price. We obtain implicit feedback rules and explicit non-linear time paths of extraction, carbon tax, and producer price. Consumers are always able to reap some share of the scarcity and monopoly rents, whereas producers partially pre-empt the carbon tax only if the marginal damage under the ceiling is small. We compare the MPNE to the efficient, open-loop, and cartel-without-tax equilibria.

Citation

Dullieux, Rémy, Ragot, Lionel and Schubert, Katheline, (2011), Carbon Tax and OPEC’s Rents Under a Ceiling Constraint, Scandinavian Journal of Economics, 113, issue 4, p. 798-824, https://EconPapers.repec.org/RePEc:bla:scandj:v:113:y:2011:i:4:p:798-824.

@ARTICLE{RePEc:bla:scandj:v:113:y:2011:i:4:p:798-824,
title = {Carbon Tax and OPEC’s Rents Under a Ceiling Constraint},
author = {Dullieux, Rémy and Ragot, Lionel and Schubert, Katheline},
year = {2011},
journal = {Scandinavian Journal of Economics},
volume = {113},
number = {4},
pages = {798-824},
url = {https://EconPapers.repec.org/RePEc:bla:scandj:v:113:y:2011:i:4:p:798-824}
}