NBER published an article of the employees of Gaidar Institute on issues of optimal taxation of emission of greenhouse gases
The National Bureau of Economic Research of the USA published academic paper "Making Carbon Taxation a Generational Win Win" written by Laurence Kotlikoff, Head of International Department of Fiscal Sustainability, Andrey Polbin, Head of Macroeconomic Modeling Department, both employees of the Gaidar Institute, as well as by Felix Kubler, Jeffrey Sax and Simon Scheidegger.
This work is mainly concerned with the issue of optimal taxation of the emission of greenhouse gases. This issue is studied primarily under the task of central planning, providing a contrast between losses of current generations on prevention of global warming and advantages of future generations from a cleaner environment when building-up an optimal path of carbon tax. These frames hide potential of carbon taxation for receiving mutually profitable results for all generations.
This research deals with a large-scale dynamic model with 55 overlapping generations for estimation of carbon taxation policy providing the highest regular growth of wellbeing for every generation. This model represents coal, oil and gas with their damage increasing when it comes to exhaustion of natural resources as well as alternative “green” energy. Damage function resulted from global warming is based on works by William Nordhouse. According to results of numerical simulation analysis, optimal tax on emission of greenhouse gases based on optimal regular improvement of wellbeing starts from a tax amounted to $ 30 per CO2 ton and increases annually by 1.5%. This tax path improves wellbeing of the current and future generations by 0.73% of consumption.
However, regular distribution of growth of efficiency requires taxation of future generations by 8.1% and subsidy of current generations by 1.2% of the given cost of consumption. Without this re-distribution, the tax on emission of greenhouse gases will result in deterioration according to Pareto principle: current generations experience damages of wellbeing up to 0.84% while future generations will feel improvement of wellbeing up to 7.54% of consumption.
This research deals with a large-scale dynamic model with 55 overlapping generations for estimation of carbon taxation policy providing the highest regular growth of wellbeing for every generation. This model represents coal, oil and gas with their damage increasing when it comes to exhaustion of natural resources as well as alternative “green” energy. Damage function resulted from global warming is based on works by William Nordhouse. According to results of numerical simulation analysis, optimal tax on emission of greenhouse gases based on optimal regular improvement of wellbeing starts from a tax amounted to $ 30 per CO2 ton and increases annually by 1.5%. This tax path improves wellbeing of the current and future generations by 0.73% of consumption.
However, regular distribution of growth of efficiency requires taxation of future generations by 8.1% and subsidy of current generations by 1.2% of the given cost of consumption. Without this re-distribution, the tax on emission of greenhouse gases will result in deterioration according to Pareto principle: current generations experience damages of wellbeing up to 0.84% while future generations will feel improvement of wellbeing up to 7.54% of consumption.