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The political economy of mitigation and adaptation
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- Habla, Wolfgang (author)
- Gothenburg University,Göteborgs universitet,Institutionen för nationalekonomi med statistik, Enheten för miljöekonomi,Department of Economics, Environmental Economics Unit
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- Roeder, Kerstin, 1981 (author)
- Gothenburg University,Göteborgs universitet,Institutionen för nationalekonomi med statistik,Department of Economics
- (creator_code:org_t)
- Elsevier BV, 2017
- 2017
- English.
- In: European Economic Review. - : Elsevier BV. - 0014-2921 .- 1873-572X. ; 92, s. 239-257
- Journal article (peer-reviewed)
Abstract
Subject headings
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- Climate policies have very uneven effects in terms of their fiscal impact. While mitigation of climate change typically raises revenues, adaptation is costly to the taxpayer, and the more so, the more distortionary the tax system. Moreover, the benefits and costs of mitigation and adaptation vary across generations. In an OLG model with majority voting, we show that even in the absence of international pollution spillovers and strategic considerations, neither mitigation nor adaptation can be expected to be set efficiently. The reason is that voters have incentives to use climate policy as an instrument for redistribution. We find that these incentives depend on the underlying tax system. Furthermore, the chosen mitigation or adaptation level may be inefficiently high in a political equilibrium with a distortionary income tax system, although not simultaneously. This finding suggests that a distortionary income tax system favors one policy (mitigation or adaptation) at the expense of the other. The calibration of our model to the German economy reveals that both mitigation and adaptation are lower than their socially optimal levels.
Subject headings
- SAMHÄLLSVETENSKAP -- Ekonomi och näringsliv -- Nationalekonomi (hsv//swe)
- SOCIAL SCIENCES -- Economics and Business -- Economics (hsv//eng)
Keyword
- Adaptation; Mitigation; Political economy; Majority voting; OLG; Environmental taxes
Publication and Content Type
- ref (subject category)
- art (subject category)
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