Coal taxes as supply-side climate policy: a rationale for major exporters?

The shift away from coal is at the heart of the global low-carbon transition. Cangovernments of coal-producing countries help facilitate this transition and benefit from it? Thispaper analyses the case for coal taxes as supply-side climate policy implemented by large coalexporting countries. Coal taxes can reduce global carbon dioxide emissions and benefit coal-rich countries through improved terms-of-trade and tax revenue. We employ a multi-periodequilibrium model of the international steam coal market to study a tax on steam coal levied byAustralia alone, by a coalition of major exporting countries, by all exporters, and by allproducers. A unilateral export tax has little impact on global emissions and global coal pricesas other countries compensate for reduced export volumes from the taxing country. Bycontrast, a tax jointly levied by a coalition of major coal exporters would significantly reduceglobal emissions from steam coal and leave them with a net sector level welfare gain,approximated by the sum of producer surplus, consumer surplus, and tax revenue. Productiontaxes consistently yield higher tax revenues and have greater effects on global coal consumption with smaller rates of carbon leakages. Questions remain whether coal taxes by majorsuppliers would be politically feasible, even if they could yield economic benefits.