• Focus Area Climate Change Policies and Governance Climate Change Policies and Governance
  • Type Discussion paper
  • Date 30 December 2018


This research paper compares the relative welfare impact of different options for allocating the financing burden of climate change mitigation policies. Focusing on efficient ways to finance policies aimed at climate change mitigation, not only at direct carbon reduction, could delink the issue of carbon taxation from carbon emissions.

A Pigouvian tax is the traditional way of correcting for negative externalities, or the undesirable consequences for society arising from the actions of a company or industry sector, by levying additional taxes on that activity. Pigouvian taxation corrects society’s welfare loss, however, from the viewpoint of the private sector, such taxation imposes a deadweight economic loss with respect to the original private equilibrium.

As an alternative, we evaluate a methodology that could fund investments to reduce carbon dioxide (CO2) emissions, and we show that the policy we consider to be optimal from a tax standpoint – Ramsey pricing can both improve world welfare and be politically more acceptable than other pricing options. Rather than focus directly on emissions reduction by taxing energy, a Ramsey pricing solution can be designed to minimize distortions while raising funds for investment in climate change mitigation.


Tarek Atalla

Tarek Atalla

Former Research Associate

Simona Bigerna

Simona Bigerna

Associate Professor of Economics, University of Perugia

Carlo Andrea Bollino

Visiting Researcher Carlo Andrea Bollino is a Professor of Economics at the University of Perugia and Professor of Energy Economics at the… Carlo Andrea Bollino is a Professor of Economics at the University of Perugia and Professor of Energy Economics at the University LUISS, Rome. He holds a Ph.D. in Economics from the University of Pennsylvania, where he was supervised by Nobel laureate Professor Lawrence Klein. He has been a Visiting Researcher at KAPSARC since 2015, focusing on econometric analysis, electricity market reform and climate change policy analysis. He is a Visiting Professor at Technische Universität, Berlin, Germany, the President (honorary) of the Italian Association for Energy Economics. He was the President of the IAEE in 2008, the President of GSE (Italian Renewable Energy Agency) and GRTN (Italian Electric Transmission network); Energy Advisor to the Minister of Industry and Ministry of Treasury of Italy; Chief Economist, ENI; Economist, Bank of Italy; and a Research Associate at Project Link for the United Nations. He has testified to the Italian Senate and Parliament briefings and has provided various governments with technical and policy reports on electricity market liberalization and renewable energy developments.


  • Consumer Behavior
  • Investment
  • Energy and Environment
  • Macroeoconometric Modeling

Publications See all Carlo Andrea Bollino’s publications

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