This paper develops a framework to explore the implications of trade and domestic policy distortions for the magnitude of carbon emissions and for the welfare costs of abating these emissions. An application to the electricity-generating sector in India shows that economic policy reforms can also be effective environmental policy instruments and reduce carbon emissions even in the absence of an emissions tax. This reduction in emissions is accompanied by an increase in domestic welfare, an increase in electricity output, and conservation of coal. Coordinating trade and domestic policy reform with an emissions tax policy reduces emissions further, while leading to gains in welfare that are greater than those under an emissions tax policy alone.

Original languageEnglish (US)
Pages (from-to)125-152
Number of pages28
JournalResource and Energy Economics
Issue number2
StatePublished - May 1999


  • Carbon emissions
  • Energy efficiency
  • Policy distortions
  • Welfare economics

ASJC Scopus subject areas

  • Economics and Econometrics


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