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Too many traders? On the welfare ranking of prices and quantities

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  • Pauli Lappi

    (University of Helsinki)

Abstract

This study conducts a welfare comparison of emission tax and emissions trading in a multi-period model, in which the regulation instruments are chosen through a political process and unregulated participants can trade in the permit market. It is found that under reasonable conditions a tax yields a higher welfare level than emissions trading.

Suggested Citation

  • Pauli Lappi, 2017. "Too many traders? On the welfare ranking of prices and quantities," Economics Bulletin, AccessEcon, vol. 37(3), pages 1959-1965.
    • Handle: RePEc:ebl:ecbull:eb-17-00213
    as

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    File URL: http://www.accessecon.com/Pubs/EB/2017/Volume37/EB-17-V37-I3-P176.pdf
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    References listed on IDEAS

    as
    1. Larry Karp & Jiangfeng Zhang, 2016. "Taxes Versus Quantities for a Stock Pollutant with Endogenous Abatement Costs and Asymmetric Information," Studies in Economic Theory, in: Graciela Chichilnisky & Armon Rezai (ed.), The Economics of the Global Environment, pages 493-533, Springer.
    2. Grossman, Gene M & Helpman, Elhanan, 1994. "Protection for Sale," American Economic Review, American Economic Association, vol. 84(4), pages 833-850, September.
    3. PAOLO COLLA & MARC GERMAIN & VINCENT Van STEENBERGHE, 2012. "Environmental Policy and Speculation on Markets for Emission Permits," Economica, London School of Economics and Political Science, vol. 79(313), pages 152-182, January.
    4. Montero, Juan-Pablo, 2002. "Prices versus quantities with incomplete enforcement," Journal of Public Economics, Elsevier, vol. 85(3), pages 435-454, September.
    5. Fredriksson, Per G., 1997. "The Political Economy of Pollution Taxes in a Small Open Economy," Journal of Environmental Economics and Management, Elsevier, vol. 33(1), pages 44-58, May.
    6. Shinya Kawahara, 2014. "Endogenous Lobby Formation and Endogenous Environmental Protection with Unilateral Tariff Reduction," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 57(1), pages 41-57, January.
    7. Newell, Richard G. & Pizer, William A., 2003. "Regulating stock externalities under uncertainty," Journal of Environmental Economics and Management, Elsevier, vol. 45(2, Supple), pages 416-432, March.
    8. Aidt, Toke S., 1998. "Political internalization of economic externalities and environmental policy," Journal of Public Economics, Elsevier, vol. 69(1), pages 1-16, July.
    9. Baldursson, Fridrik M & von der Fehr, N.-H.M.Nils-Henrik M, 2004. "Price volatility and risk exposure: on market-based environmental policy instruments," Journal of Environmental Economics and Management, Elsevier, vol. 48(1), pages 682-704, July.
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    More about this item

    Keywords

    Emissions trading; Emission tax; Lobbying; Welfare;
    All these keywords.

    JEL classification:

    • Q5 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics

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