Research

Working Papers

Pigou vs Equity: Optimal Corrective Tax & Rebate Rules | single authored (draft available upon request)

Abstract: This paper addresses the design of Pigouvian taxes aimed at the climate externality in conjunction with other tax and transfer instruments. The analysis is split into two steps:  First, the design of commodity-level carbon taxes, and second, the optimal recycling of the associated revenue. I show that the optimal pure carbon taxes differ from the benchmark of a Pigouvian tax, i.e., the marginal environmental damage. They are differentiated between commodities based on their carbon intensity, the behavioral effectiveness and distributional concerns, i.e., the more emissions intensive, elastic, and redistributionally unvaluable a good is, the higher the carbon tax on it.  However, this policy is suboptimal if the planner has vertically redistributive preferences, and additional tax and transfer policies can increase welfare. If the tax system is sufficiently unrestricted, the Pigouvian benchmark is recovered through the interaction of the standard tax instruments with carbon prices.  

Emissions Trading with Supply Adjustment Mechanisms and Market Power | with Simon Quemin and Niklas Schoch

Abstract: Supply adjustment mechanisms (SAMs) are a central feature of modern emissions markets, yet their interaction with market power remains unexplored. We develop a dynamic permit market model to study how the choice between a price-based and a quantity-based SAM indicator shapes firms' incentives to exercise market power. We find this choice has contrasting first-order effects: a well-designed price-based SAM can discipline strategic withholding and reduce price markups, whereas a quantity-based SAM systematically exacerbates market power and becomes inoperative in late market stages. Our results suggest that SAMs are not merely tools for enhancing market resilience, but can be explicitly designed to mitigate market power in emissions markets.

Work in Progress

Politically Fragile Climate Policy | with Justus Heuer and Saskia Schütte

Optimal Predistribution Design | with Robin Liebholz