International Side-payments to Improve Global Public Good Provision when Transfers are Refinanced through a Tax on Local and Global Externalities

This paper discusses a tax-transfer scheme that aims to address the under-provision problem associated with the private supply of international public goods and to bring about Pareto optimal allocations internationally. In particular, we consider the example of the global public good 'climate s...

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Bibliographic Details
Published in:International economic journal 2014, 28(1), , pp.71-93
Main Authors: Altemeyer-Bartscher, Martin, Markandya, Anil, Rübbelke, Dirk T. G.
Format: Article
Language:English
Subjects:
Abatement
Amortization
Ancillary benefits
Benefits
Climate
Climate policy
Economic models
Effects
Environment
Environmental policy
Environmental tax
environmental taxation
Externality
Financial support
impure public goods
Incentives
international transfers
Investments
Payments
Policy implementation
Political support
Public debt
Public debts
Public good
Public goods
Public services
Simulation
Stabilization
Taxation
경제학
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Summary:This paper discusses a tax-transfer scheme that aims to address the under-provision problem associated with the private supply of international public goods and to bring about Pareto optimal allocations internationally. In particular, we consider the example of the global public good 'climate stabilization', both in an analytical and a numerical simulation model. The proposed scheme levies Pigouvian taxes globally, while international side-payments are employed in order to provide incentives to individual countries for not taking a free-ride from the international Pigouvian tax scheme. The side-payments, in turn, are financed via environmental taxes. As a distinctive feature, we take into account ancillary benefits that may be associated with local public characteristics of climate policy. We determine the positive impact that ancillary effects may exert on the scope for financing side-payments via environmental taxation. A particular attractive feature of ancillary benefits is that they arise shortly after the implementation of climate policies and therefore yield an almost immediate payback of investments in abatement efforts. Especially in times of high public debt levels, long periods of amortization would tend to reduce political support for investments in climate policy.
ISSN:1016-8737
1743-517X
DOI:10.1080/10168737.2012.759986