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EU-Type Carbon Emissions Trade and the Distributional Impact of Overlapping Emissions Taxes

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  • Thomas Eichner
  • Rüdiger Pethig

Abstract

The European Union fulfills its emissions reductions commitments by means of an emissions trading scheme covering some part of each member state’s economy and by national emissions control in the rest of their economies. The member states also levy energy/emissions taxes overlapping with the trading scheme. Restricting our focus on cost-effective policies, this paper investigates the distributive consequences of increasing the overlapping emissions tax that is uniform across countries. For quasi-linear utility functions and for a class of parametric utility and production functions emissions tax increases turn out to be exactly offset by permit price reductions. As a consequence permit-exporting [permit-importing] countries lose [gain] from an increase in the emissions tax. These results are not general, however. By means of a numerical example we show that export-import reversals and welfare reversals are possible.

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File URL: http://www.cesifo-group.de/portal/page/portal/DocBase_Content/WP/WP-CESifo_Working_Papers/wp-cesifo-2009/wp-cesifo-2009-03/cesifo1_wp2579.pdf
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Bibliographic Info

Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 2579.

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Date of creation: 2009
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Handle: RePEc:ces:ceswps:_2579

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Related research

Keywords: emissions taxes; emissions trading; international trade;

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References

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  1. Steven Sorrell, 2003. "Carbon Trading in the Policy Mix," Oxford Review of Economic Policy, Oxford University Press, vol. 19(3), pages 420-437.
  2. Shiell, Leslie, 2003. "Equity and efficiency in international markets for pollution permits," Journal of Environmental Economics and Management, Elsevier, vol. 46(1), pages 38-51, July.
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Cited by:
  1. Margarita Robaina Alves & Miguel Rodríguez & Catarina Roseta-Palma, 2010. "Sectoral and regional impacts of the European Carbon Market in Portugal," GEE Papers 0021, Gabinete de Estratégia e Estudos, Ministério da Economia e da Inovação, revised Jul 2010.

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