Working Paper: NBER ID: w13454
Authors: Hanswerner Sinn
Abstract: Judged by the principle of intertemporal Pareto optimality, insecure property rights and the greenhouse effect both imply overly rapid extraction of fossil carbon resources. A gradual expansion of demand-reducing public policies -- such as increasing ad-valorem taxes on carbon consumption or increasing subsidies for replacement technologies -- may exacerbate the problem as it gives resource owners the incentive to avoid future price reductions by anticipating their sales. Useful policies instead involve sequestration, afforestation, stabilization of property rights and emissions trading. Among the public finance measures, constant unit carbon taxes and source taxes on capital income for resource owners stand out.
Keywords: global warming; carbon emissions; public policy; resource extraction
JEL Codes: H23; O13; Q32; Q54
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| insecure property rights (P14) | over-extraction of fossil carbon resources (L71) |
| over-extraction of fossil carbon resources (L71) | higher carbon dioxide emissions (P18) |
| higher carbon dioxide emissions (P18) | exacerbate global warming (Q54) |
| demand-reducing policies (R22) | increased extraction by lowering global energy prices (F69) |
| decrease in demand for fossil fuels in one region (Q31) | increase in extraction elsewhere (L72) |
| genuine demand-reducing measures must also address carbon supply (Q41) | effective policies (D78) |
| policies should aim to flatten the extraction path over time (F68) | strategic resource management (Q28) |