Output-Based Allocation of Emissions Permits for Mitigating Tax and Trade Interactions
AbstractThe allocation of tradable emissions permits has important efficiency as well as distributional effects when tax and trade distortions are taken into account. We compare different rules for allocating carbon allowances within sectors (lump-sum grandfathering, output-based allocation (OBA), auctioning) and among sectors (historical emissions or value-added shares). The output subsidies implicit in OBA mitigate tax interactions, unlike grandfathering. OBA with sectoral distributions based on value added is similar to revenue recycling with auctioning. OBA based on historical emissions supports heavier polluters, more effectively counteracting carbon leakage, but at higher welfare costs. Less energy-intensive sectors are also sensitive to allocation rules.
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Bibliographic InfoArticle provided by University of Wisconsin Press in its journal Land Economics.
Volume (Year): 83 (2007)
Issue (Month): 4 ()
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Web page: http://le.uwpress.org/
Find related papers by JEL classification:
- Q53 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Air Pollution; Water Pollution; Noise; Hazardous Waste; Solid Waste; Recycling
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