TY  - RPRT
A1  - Franks, Max
A1  - Kalkuhl, Matthias
A1  - Lessmann, Kai
T1  - Optimal Pricing for Carbon Dioxide Removal Under Inter-Regional Leakage
T2  - CEPA Discussion Papers
N2  - Carbon dioxide removal (CDR) moves atmospheric carbon to geological or land-based sinks. In a first-best setting, the optimal use of CDR is achieved by a removal subsidy that equals the optimal carbon tax and marginal damages. We derive second-best subsidies for CDR when no global carbon price exists but a national government implements a unilateral climate policy. We find that the optimal carbon tax differs from an optimal CDR subsidy because of carbon leakage, terms-of-trade and fossil resource rent dynamics. First, the optimal removal subsidy tends to be larger than the carbon tax because of lower supply-side leakage on fossil resource markets. Second, terms-of-trade effects exacerbate this wedge for net resource exporters, implying even larger removal subsidies. Third, the optimal removal subsidy may fall below the carbon tax for resource-poor countries when marginal environmental damages are small.
T3  - CEPA Discussion Papers - 43 
KW  - carbon pricing
KW  - trade
KW  - unilateral climate policy
KW  - terms-of-trade effects
KW  - removal subsidies
Y1  - 2022
U6  - http://nbn-resolving.de/urn/resolver.pl?urn:nbn:de:kobv:517-opus4-538080
SN  - 2628-653X
IS  - 43
ER  -