Abstract:

In the wake of the USA's refusal to ratify the Kyoto agreement on curbing greenhouse gas emissions, this article pledges for a national energy policy beyond Kyoto, based on local external effects stemming from the combustion of fossil fuels. Due to varying external effects a national policy will differentiate energy taxes between fuels. Using Swiss estimates of external effects, it is shown that a national policy would fulfil the Kyoto goal as a secondary benefit. Moreover, a nationally based fossil fuel policy would affect the scope for an international trade of CO2 emission rights, as a net-buyer of emission rights will lose from participating in such a trade.