Published in
Scandinavian Journal of Economics 113 (4), 2011, pages 846-865
Abstract
Several recent articles have analyzed climate policy, paying explicit attention to the fact that carbon resources are non-renewable. In most of this body of literature, the economy is treated as a single unit and, in the context of climate policy, it seems reasonable to interpret this as the whole world. However, carbon taxes and other climate policies differ substantially across countries. With such heterogeneity, the effects on the emission paths of changes in taxes, costs, and subsidies might be very different from what is found for a hypothetical world of identical countries.