  Dielectric screening plays a vital role for the physical properties in the
nanoscale and also alters our ability to detect and characterize nanomaterials
by optical techniques. We study the dielectric screening inside of carbon
nanotubes and how it changes electromagnetic fields and many-body effects for
encapsulated nanostructures. First, we show that the local electric field
inside a nanotube is altered by one-dimensional screening with dramatic effects
on the effective Raman scattering efficiency of the encapsulated species for
metallic walls. The scattering intensity of the inner tube is two orders of
magnitude weaker than for the tube in air, which is nicely reproduced by local
field calculations. Secondly, we find that the optical transition energies of
the inner nanotubes shift to lower energies compared to a single-walled carbon
nanotubes of the same chirality. The shift is higher if the outer tube is
metallic than when it is semiconducting. The magnitude of the shift suggests
that the excitons of small diameter inner metallic tubes are thermally
dissociated at room temperate if the outer tube is also metallic and in essence
we observe band-to-band transitions.
