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Two world views on carbon revenues

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  • Dallas Burtraw

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  • Samantha Sekar
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    Abstract

    The introduction of a price on CO 2 is expected to be more efficient than prescriptive regulation. It also instantiates substantial economic value. Initially, programs allocated this value to incumbent firms (grandfathering), but the growing movement toward auctioning or emissions fees makes carbon revenues into a payment for environmental services. This paper asks to whom should this payment accrue? If the atmosphere resource, as a common property resource, is viewed as the property of government, then the decision of how to use the revenue can be viewed as a fiscal problem, and efficiency considerations dominate. If the atmosphere is viewed as held in common, then the revenue might be considered compensation to owners and delivered as payment to individuals. This decision has efficiency and distributional consequences that affect the political economy and the likelihood and durability of climate policy. We summarize trends among six existing carbon-pricing programs. Copyright AESS 2014

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    Bibliographic Info

    Article provided by Springer in its journal Journal of Environmental Studies and Sciences.

    Volume (Year): 4 (2014)
    Issue (Month): 1 (March)
    Pages: 110-120

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    Handle: RePEc:spr:jenvss:v:4:y:2014:i:1:p:110-120

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    Web page: http://www.springer.com/economics/journal/13412

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    Related research

    Keywords: Auction; Cap and trade; Emissions fee; Emissions tax; Allocation; Grandfathering; Climate change; Policy; JEL Classification; H23; N5; P48;

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    1. A.L. Bovenberg & Lawrence H. Goulder & Derek J. Gurney, 2003. "Efficiency Costs of Meeting Industry-Distributional Constraints under Environmental Permits and Taxes," NBER Working Papers 10059, National Bureau of Economic Research, Inc.
    2. Ken Binmore & Paul Klemperer, 2002. "The Biggest Auction Ever: the Sale of the British 3G Telecom Licences," Economic Journal, Royal Economic Society, vol. 112(478), pages C74-C96, March.
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    4. Tversky, Amos & Thaler, Richard H, 1990. "Anomalies: Preference Reversals," Journal of Economic Perspectives, American Economic Association, vol. 4(2), pages 201-11, Spring.
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    7. Spulber, Daniel F., 1985. "Effluent regulation and long-run optimality," Journal of Environmental Economics and Management, Elsevier, vol. 12(2), pages 103-116, June.
    8. Parry, Ian W. H. & Williams, Roberton III & Goulder, Lawrence H., 1999. "When Can Carbon Abatement Policies Increase Welfare? The Fundamental Role of Distorted Factor Markets," Journal of Environmental Economics and Management, Elsevier, vol. 37(1), pages 52-84, January.
    9. Burtraw, Dallas & Sweeney, Richard & Walls, Margaret, 2009. "The Incidence of U.S. Climate Policy: Alternative Uses of Revenues from a Cap-and-Trade Auction," Discussion Papers dp-09-17-rev, Resources For the Future.
    10. Burtraw, Dallas & Sweeney, Richard & Walls, Margaret, 2009. "The Incidence of U.S. Climate Policy: Alternative Uses of Revenues from a Cap-and-Trade Auction," National Tax Journal, National Tax Association, vol. 62(3), pages 497-518, September.
    11. Polinsky, A Mitchell, 1972. "Probabilistic Compensation Criteria," The Quarterly Journal of Economics, MIT Press, vol. 86(3), pages 407-25, August.
    12. Dallas Burtraw & Karen Palmer, 2008. "Compensation rules for climate policy in the electricity sector," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 27(4), pages 819-847.
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