Target-setting for technological development of the Russian aircraft industry in the field of countering climate change

Subject. The article discusses the introduction of a Pigouvian tax on greenhouse gas emissions. Objectives. The objective of the study is to develop methods for setting the target level of CO2 emissions by Russian aircraft, based on Russia's national interests (both economic and environmental). Methods. The emission target was set on the basis of the classical approach of determining the economically optimal level of pollution at the intersection of the curves of marginal damage from pollution and marginal costs of eliminating pollution. The assessment of marginal costs of reducing CO2 emissions was based on the learning curves in the field of research and development aimed at reducing emissions. Results. We developed a method to set up the target level of CO2 emissions by Russian aircraft based on Russia's national interests (economic and environmental), rather than on external requirements dictated by competitor nations. Conclusions. According to the calculations on the basis of realistic estimates of fixed costs for reducing the carbon dioxide emissions, the utility is maximized with a reduction of CO2 emissions by 10% (for this method of assessing the damage to the State and with the realistic estimates of fixed cost of reducing carbon dioxide emissions).

Optimal Population Policy with Health Care and Lethal Pollution

Optimal population policy is examined in the following setup. Families invest in capital, spend on health care and determine their number of children. Firms produce output from labor, capital and pollutants. Pollution increases, but private and public health care decrease mortality dynamically, with lags. Our main findings are the following. A marginal increase in public health care improves welfare as long as it diminishes the mortality rate more than that in private health care. The government can decentralize the social optimum by a parental tax on newborns and a Pigouvian tax on pollutants. Private health care should not be taxed.

Pigouvian Tolls and Welfare Optimality with Parallel Servers and Heterogeneous Customers

Congestion externalities are a well-known phenomenon in transportation and communication networks, healthcare etc. Optimization by self-interested agents in such settings typically results in equilibria which are sub-optimal for social welfare. Pigouvian taxes or tolls, which impose a user charge equal to the negative externality caused by the marginal user to other users, are a mechanism for combating this problem. In this paper, we study a non-atomic congestion game in which heterogeneous agents choose amongst a finite set of heterogeneous servers. The delay at a server is an increasing function of its load. Agents differ in their sensitivity to delay. We show that, while selfish optimisation by agents is sub-optimal for social welfare, imposing admission charges at the servers equal to the Pigouvian tax causes the user equilibrium to maximize social welfare. In addition, we characterize the structure of welfare optimal and of equilibrium allocations.

Interventions with Sticky Social Norms: A Critique

We study the consequences of policy interventions when social norms are endogenous but costly to change. In our environment a group faces a negative externality that it partially mitigates through incentives in the form of punishments. In this setting policy interventions can have unexpected consequences. The most striking is that when the cost of bargaining is high introducing a Pigouvian tax can increase output - yet in doing so increase welfare. An observer who saw that an increase in a Pigouvian tax raised output might wrongly conclude that this harmed welfare and that a larger tax increase would also raise output. This counter-intuitive impact on output is demonstrated theoretically for a general model and found in case studies for public goods subsidies and cartels.

ENVIRONMENTAL POLICY OF RENEWABLE ENERGY INDUSTRY UNDER OPEN CONDITIONS

<p>Renewable energy has two environmental externalities: one is the positive externality as an alternative to fossil energy consumption; the other is the negative externality with its production process consuming fossil energy. If the domestic renewable energy products export to foreign country with not only generating but importing renewable energy, what the environmental policy of both domestic and foreign governments should be? To this end, this paper establishes a renewable energy trade model of the two countries having only one firm for each other. Under the Cournot competition, the results show: first, if the two governments have no cooperation, the best environmental policy for domestic government would be taxation, but not necessarily the Pigouvian tax; foreign government not only impose on foreign manufacturer equal to pollution marginal damage, but also subsidize it over the marginal revenue of renewable energy; Second, if the two governments cooperate, the joint pollution tax is Pigouvian tax equal to the marginal damage of total pollution emissions, while joint subsidy is higher than the marginal revenue of total renewable energy.</p>

Emission taxes and feed-in subsidies in the regulation of a polluting monopoly

The paper studies the use of emission taxes and feed-in subsidies for the regulation of a monopoly that can produce the same good with a technology that employs a polluting input and a clean technology. In the first part of the paper, we show that the efficient solution can be implemented combining a tax on emissions and a subsidy on clean output. The tax is lower than the environmental damages, and the subsidy is equal to the difference between the price and the marginal revenue. In the second part of the paper, the second-best tax and subsidy are also calculated solving a two-stage policy game between the regulator and the monopoly with the regulator acting as the leader of the game. We find that the second-best tax rate can be the Pigouvian tax, but only if the marginal costs of the clean technology are constant. Using a linear–quadratic specification of the model, we show that the clean output is larger when a feed-in subsidy is used than when the tax is applied, but the dirty output can be larger or lower depending on the magnitude of marginal costs of the clean technology and marginal damages. The same occurs for the net social welfare, although we find that for low enough marginal costs of the clean technology, the net social welfare is larger when a feed-in subsidy is used to promote clean output regardless the importance of the marginal damages.

Tax Reform for the Energy Transition in Korea’s Power Generation Sector

The tax structure capable of achieving an energy transition in the power sector was analyzed by applying the Pigouvian tax on generation fuels. Under the 2018 Tax Act Amendment, the tax rate criteria for the excise tax on power generation fuels changed from the calorific value to environmental externalities of the fuel. However, to reverse the merit order of bituminous coal generation with liquefied natural gas (LNG) generation, reflecting only some external costs of the environment as a tax is not enough. In this paper, we established four tax reform scenarios for bituminous coal and LNG considering environmental externalities, and we analyzed the reversal of dispatch priority using the electricity system unit commitment and M-Core economic dispatch model. According to the analysis results, the share of bituminous coal generation will be reduced to 10–20% depending on the scenario, reflecting the relative tax rate equalizing the fuel costs of bituminous coal and LNG power. To achieve an energy transition by reversing the merit order of bituminous coal and LNG generation, the tax rate of bituminous coal must be more than twice that of LNG. Moreover, to achieve an eco-friendly generation mix through tax reform, the external costs of the environment by fuel source should be accurately estimated and efficient taxation that can adequately reflect these external costs of the environment while considering tax fairness, neutrality and simplicity should be established.

The Polluter-Pays Principle in Climate Change Law: an Economic Appraisal

There is a lively debate among scholars and policymakers on whether either consumers or producers should be seen as responsible for pollution caused in the production and consumption of traded goods. In this article, we argue that, in conformity with intuitive conceptions of causation, the economic incidence of a Pigouvian tax can be seen as a measure of the relative contribution to pollution of consumers and producers. Taking this perspective on the polluter-pays principle can help increase ambition in climate change action because it reduces the relevance of the question “Who is the polluter?” in climate change negotiations and enables a focus instead on the issue of “What can be done?” to reduce carbon emissions.