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Taxes, Permits and the Adoption of Abatement Technology under Imperfect Compliance

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Author Info

  • Villegas, Clara

    ()
    (Department of Economics, School of Business, Economics and Law, Göteborg University)

  • Coria, Jessica

    ()
    (Department of Economics, School of Business, Economics and Law, Göteborg University)

Abstract

his paper analyzes the effects of the choice between price-based and quantity-based emission regulations on compliance incentives and social welfare in the presence of incomplete enforcement and technology adoption. We show that in contrast to taxes, the extent of violations under tradable emission permits (TEPs) decreases with the rate of technology adoption. However, in terms of welfare, the ranking of the instruments is not so straightforward: taxes induce lower emission damages while TEPs induce lower abatement, investment, and expected enforcement costs. Thereby, the overall ranking depends on the extent to which these effects offset each other.

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File URL: http://hdl.handle.net/2077/20420
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Bibliographic Info

Paper provided by University of Gothenburg, Department of Economics in its series Working Papers in Economics with number 368.

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Length: 29 pages
Date of creation: 16 Jun 2009
Date of revision:
Handle: RePEc:hhs:gunwpe:0368

Contact details of provider:
Postal: Department of Economics, School of Business, Economics and Law, University of Gothenburg, Box 640, SE 405 30 GÖTEBORG, Sweden
Phone: 031-773 10 00
Web page: http://www.handels.gu.se/econ/
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Keywords: Technological adoption; environmental policy; imperfect compliance; enforcement; social welfare;

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Cited by:
  1. Arguedas, Carmen & Camacho, Eva & Zofío, José Luis, 2009. "Environmental Policy Instruments: Technology Adoption Incentives with Imperfect Compliance," Working Papers in Economic Theory 2009/03, Universidad Autónoma de Madrid (Spain), Department of Economic Analysis (Economic Theory and Economic History).
  2. Coria, Jessica & Villegas-Palacio, Clara, 2010. "Targeted Enforcement and Aggregate Emissions With Uniform Emission Taxes," Working Papers in Economics 455, University of Gothenburg, Department of Economics.

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