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Economic Implications of Alternative Allocation Schemes for Emission Allowances

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Author Info
Christoph Böhringer
Andreas Lange

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Abstract

For reasons of political feasibility, emission trading systems may have to rely on free initial allocation of emission allowances in order to ameliorate adverse production and employment effects in dirty industries. Against the background of an emerging European-wide emission trading system, we examine the trade-off between such compensation and economic efficiency under output-based and emissions-based allocation rules. We show that the emissions-based allocation rule is more costly than the output-based rule in terms of maintaining output and employment in energy-intensive industries. When the international allowance price increases, the inferiority of emissions-based allocation "vis-à-vis" output-based allocation becomes more pronounced, as emission subsidies drastically restrict efficiency gains from international trade in emission allowances. Copyright The editors of the "Scandinavian Journal of Economics", 2005 .

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File URL: http://www.blackwell-synergy.com/doi/abs/10.1111/j.1467-9442.2005.00423.x
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Publisher Info
Article provided by Blackwell Publishing in its journal The Scandinavian Journal of Economics.

Volume (Year): 107 (2005)
Issue (Month): 3 (09)
Pages: 563-581
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Handle: RePEc:bla:scandj:v:107:y:2005:i:3:p:563-581

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  1. Dannenberg, Astrid & Mennel, Tim & Moslener, Ulf, 2007. "What Does Europe Pay for Clean Energy? ? Review of Macroeconomic Simulation Studies," ZEW Discussion Papers 07-019, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research. [Downloadable!]
  2. Böhringer, Christoph & Lange, Andreas, 2003. "Efficiency, Compensation, and Discrimination : What is at Stake When Implementing the EU Emissions Trading Scheme?," ZEW Discussion Papers 03-73, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research. [Downloadable!]
  3. Löschel, Andreas & Alexeeva-Talebi, Victoria & Mennel, Tim, 2008. "Climate Policy and the Problem of Competitiveness: Border Tax Adjustments or Integrated Emission Trading?," ZEW Discussion Papers 08-061, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research. [Downloadable!]
  4. Böhringer, Christoph & Lange, Andreas, 2004. "Mission Impossible !? : On the Harmonization of National Allocation Plans under the EU Emissions Trading Directive," ZEW Discussion Papers 04-15, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research. [Downloadable!]
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  5. Knut Einar Rosendahl, 2007. "Incentives and quota prices in an emission trading scheme with updating," Discussion Papers 495, Research Department of Statistics Norway. [Downloadable!]
  6. Löschel, Andreas & Lange, Andreas & Hoffmann, Tim & Böhringer, Christoph & Moslener, Ulf, 2004. "Assessing Emission Allocation in Europe : An Interactive Simulation Approach," ZEW Discussion Papers 04-40, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research. [Downloadable!]
  7. Boeters, Stefan & Böhringer, Christoph & Büttner, Thiess & Kraus, Margit, 2006. "Economic Effects of VAT Reform in Germany," ZEW Discussion Papers 06-30, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research. [Downloadable!]
  8. Fischer, Carolyn, 2004. "Are Absolute Emissions Better for Modeling? It's All Relative," Discussion Papers dp-04-14, Resources For the Future. [Downloadable!]
  9. Anger, Niels & Böhringer, Christoph & Oberndorfer, Ulrich, 2008. "Public Interest vs. Interest Groups: Allowance Allocation in the EU Emissions Trading Scheme," ZEW Discussion Papers 08-023, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research. [Downloadable!]
  10. Torstein Bye and Annegrete Bruvoll, 2008. "Multiple instruments to change energy behaviour: The emperor’s new clothes?," Discussion Papers 549, Research Department of Statistics Norway. [Downloadable!]
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This page was last updated on 2009-11-22.


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