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The importance of the design of market-based instruments for CO2 mitigation: An AGE analysis for Spain

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  • González-Eguino, Mikel

Abstract

In the past few decades, economists have defended the use of market-based instruments (MBI) in environmental and climate policy. There have been many papers which have compared the costs of attaining environmental objectives with MBIs and with command and control instruments. However very few have compared different MBIs in examining these costs. This paper seeks to analyse various MBIs for CO2 mitigation from the viewpoint of cost-effectiveness, using an AGE (applied general equilibrium) model for the case of Spain. A distinction is drawn between (1) quantity instruments, which represent different extents of a market for emission permits; and (2) price instruments, which represent different types of tax. Each instrument can affect different segments of the emission sources and therefore can have very different effects on the economy as a whole. We show how MBI can help to minimise mitigation costs, but also how taxes and tradable emission permits that are limited or constrained by many exemptions and distortions can raise costs considerably.

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Bibliographic Info

Article provided by Elsevier in its journal Ecological Economics.

Volume (Year): 70 (2011)
Issue (Month): 12 ()
Pages: 2292-2302

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Handle: RePEc:eee:ecolec:v:70:y:2011:i:12:p:2292-2302

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Web page: http://www.elsevier.com/locate/ecolecon

Related research

Keywords: Environmental policy instruments; Market-based instruments; Mitigation cost; General equilibrium analysis; Spain;

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Cited by:
  1. Mikel González-Eguino & Anil Markandya & Marta Escapa, 2012. "From Shadow to Green: Linking Environmental Fiscal Reforms and the Informal Economy," Working Papers 2012-03, BC3.
  2. Anderson, Blake & M'Gonigle, Michael, 2012. "Does ecological economics have a future?," Ecological Economics, Elsevier, vol. 84(C), pages 37-48.

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