the effectiveness of possible tax policies. Applying the model to OECD data, they found that
cross-country gasoline price differences were determined mainly by tax differences. Their
results also indicated that the consumption of low-tax North America was large relative to the
rest of the OECD.
The more interesting part of their results pertain to the future: (1) if taxes are
maintained at the 1987 levels, by the year 2000, the United States would be responsible for
over two-thirds of the gasoline carbon emissions while, for the OECD as a whole, carbon
emissions would increase by about half; (2) if taxes were raised to the highest (Italian) level
across the OECD, consumption and emission would fall by approximately one-third, reflecting
a fifty percent decline in North America and a quarter in the EU; (3) if taxes were reduced
to the lowest (Greek) level, the main change would be in the EU which, with its prevailing
high tax rates, would experience a tripling in its consumption.
Other interesting conclusions bear on the elasticity estimates: ( 1 ) long run elasticities
average approximately -0.8 for price and 1.2 for income; (2) the high income elasticity
indicates that consumption would tend to increase with world growth; (3) the significant price
elasticity indicates that appropriate tax policies could control consumption; and (4) the income
elasticity being higher than the price elasticity, prices will have to rise faster than the rate of
economic growth if consumption is to be stabilised.
The justification for the above tour de force lies in the need to drive home the case
in favour of a carbon tax on transport fuels on a global scale. From the point of view of
global warming, confining such a tax within the EU would serve the purpose only partially;
it must extend to North America to have any meaningful effect. South America, Asia or
Africa should not be excluded, or should be included soon thereafter, for example, in line with
the extra time given to developing countries to conform to the recommendations of the
Montreal Protocol.
c. The case for a minimum global carbon tax
Barker (1993) has made the case for a global carbon tax emphatically. According to
him, such a tax is, indeed, the optimal instrument for the transfer of clean technology and.
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