Three Essays in Global Warming and Carbon Taxes
Date
2018-01-25
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My thesis is titled "Three Essays in Environmental Regulations and Carbon Emissions". It focuses on how firms and regions adjust their behavior in response to environmental regulation, and how different policy tools can motivate global cooperation in reducing carbon emissions to combat climate change. This thesis includes three chapters.
The first chapter of my thesis is titled "Would a Carbon Border Tax lead to a trade war? A CGE Investigation". The motivation behind this paper is that Unilateral carbon policies have failed to reduce global greenhouse gas emissions. A carbon border tax (CBT) is suggested as a potential remedy to induce countries to participate in mitigating carbon emissions. A potential problem with CBT is, however, it may lead to retaliatory actions in countries with no policies, initiating a trade war. This paper examines whether a CBT would encourage the cooperation of countries in reducing GHG emissions or whether the tax would lead to a trade war. I build a simple two-country computable general equilibrium model and calibrate it using OECD and non-OECD countries. I find that trade war is not likely to occur and CBT can be used as an enforcement mechanism to induce countries with no carbon policies to adopt such policies.
The second chapter of my thesis is titled "How Effective Are Carbon Taxes in Reducing Emissions? Evidence from the Revenue Neutral Carbon Tax in British Columbia, Canada". This paper uses a unique detailed plant-level dataset in Canada during 2004-2012 to estimate the causal effect of the British Columbia carbon tax on greenhouse gas emissions from manufacturing plants. I exploit variation in exposure to the carbon tax across time, industries, and provinces to isolate the causal effect of the carbon tax. I find that the carbon tax had a small negative effect on total emissions, and a zero to a small positive effect on output levels of high-emission-intensive plants relative to the low-emission-intensive plants. These surprising effects are possibly due to the revenue neutrality of the policy. The emission-intensity of plants, however, declined by 7 percent.
The third chapter is titled "Technological Change and Climate Disasters". In this paper, I collaborate with Dr. John Boyce, a Professor of Economics at the University of Calgary. This paper develops a semi-endogenous growth model of biased technological change across clean and dirty energy sectors. The key assumptions, are (i) that returns to R&D efforts are decreasing in the number of scientists in each sector, (ii) that returns to R&D are decreasing in past knowledge stock, and (iii) that CO2 emissions depend upon the hydrocarbon inputs used by the dirty sector rather than dirty sector output. Results show that the occurrence of an environmental disaster in the laisses-fair equilibrium depends crucially upon the relative ease of successful R&D, the relative initial states of technology, the elasticity of substitution between the clean and dirty sectors, and the rate of change in dirty input prices. We find that under some model assumptions, the laissez-faire equilibrium results in a hump-shaped CO2 emissions path. Both a carbon tax and a research subsidy to the clean sector, however, cause a faster shift of R&D effort towards the clean sector. A carbon tax with an increasing rate over time would be one of the most effective policies available to governments.
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Ahmadi, Y. (2018). Three Essays in Global Warming and Carbon Taxes (Doctoral thesis, University of Calgary, Calgary, Canada). Retrieved from https://prism.ucalgary.ca. doi:10.11575/PRISM/5455