Mirrleesian Carbon Taxation
Abstract:&nb sp;
Alleviating the economic damages fro m climate change is, to first order, a problem of efficiently limiting firm s' emissions. We analyze a neoclassical general-equilibrium model in which fossil-energy use generates climate damages. The model crucially incorporat es substantial cross-firm heterogeneity in emission efficiency that we docu ment using a novel firm-level dataset spanning 150 countries. Firms choose energy and other inputs and self-report emissions that are otherwise privat ely observed. Our central result is a simple formula for the marginal exter nality damage of emissions---the optimal carbon tax---that accounts for fir ms' incentives to distort reported emissions. The optimal tax varies marked ly across firms as a function of marginal damages, output and emission effi ciencies, and exceeds common uniform-tax benchmarks, on average. Quantifyin g the model shows large welfare gains from internalizing reporting incentiv es: the constrained optimal tax recovers 3/4 of the potential welfare benef its; a uniform tax that does not internalize reporting incentives, by contr ast, recovers almost none of them.
DTSTAMP:20260415T001825Z DTSTART:20251027T163000Z DTEND:20251027T180000Z SEQUENCE:0 TRANSP:OPAQUE END:VEVENT END:VCALENDAR