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The Distributional Effects of Carbon Regulation: Why Auctioned Carbon Permits are Attractive and Feasible

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Author Info

  • Peter Cramton

    ()
    (Economics Department, University of Maryland)

  • Suzi Kerr

    ()

Abstract

We examine the distributional effects of carbon regulation. An auction of carbon permits is the best way to achieve carbon caps set by international negotiation to limit global climate change. An auction is preferred to grandfathering (giving polluters permits in proportion to past pollution), because it allows reduced tax distortions, provides more flexibility in distribution of costs, provides greater incentives for innovation, and reduces the need for politically contentious arguments over the allocation of rents.

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File URL: http://www.cramton.umd.edu/papers1995-1999/99ee-distributional-effects-of-carbon-regulation.pdf
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Bibliographic Info

Paper provided by University of Maryland, Department of Economics - Peter Cramton in its series Papers of Peter Cramton with number 99eedecr.

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Length: 21 pages
Date of creation: 1999
Date of revision: Feb 1998
Publication status: Published in Thomas Sterner, ed., The Market and the Environment, Cheltenham, United Kingdom: Edward Elgar, chapter 12, 1999.
Handle: RePEc:pcc:pccumd:99eedecr

Note: Working Paper
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Postal: Economics Department, University of Maryland, College Park, MD 20742-7211
Phone: (202) 318-0520
Fax: (202) 318-0520
Web page: http://www.cramton.umd.edu

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Keywords: Auctions; Carbon Auctions; Pollution;

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References

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  1. William R. Cline, 1992. "Economics of Global Warming, The," Peterson Institute Press: All Books, Peterson Institute for International Economics, number 39.
  2. Lawrence M. Ausubel & Peter Cramton, 1995. "Demand Reduction and Inefficiency in Multi-Unit Auctions," Papers of Peter Cramton 98wpdr, University of Maryland, Department of Economics - Peter Cramton, revised 22 Jul 2002.
  3. Ballard, Charles L & Shoven, John B & Whalley, John, 1985. "General Equilibrium Computations of the Marginal Welfare Costs of Taxes in the United States," American Economic Review, American Economic Association, vol. 75(1), pages 128-38, March.
  4. Wilson, Robert, 1979. "Auctions of Shares," The Quarterly Journal of Economics, MIT Press, vol. 93(4), pages 675-89, November.
  5. Parry Ian W. H., 1995. "Pollution Taxes and Revenue Recycling," Journal of Environmental Economics and Management, Elsevier, vol. 29(3), pages S64-S77, November.
  6. Cason, Timothy N. & Plott, Charles R., 1996. "EPA's New Emissions Trading Mechanism: A Laboratory Evaluation," Journal of Environmental Economics and Management, Elsevier, vol. 30(2), pages 133-160, March.
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Citations

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Cited by:
  1. John Pezzey, 2003. "Emission Taxes and Tradeable Permits A Comparison of Views on Long-Run Efficiency," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 26(2), pages 329-342, October.
  2. Roberto Burguet & Jaume Sempere, 2007. "Trade of Permits for Greenhouse Gas Emissions; Bilateral Trade Need not Be the Answer," Working Papers 350, Barcelona Graduate School of Economics.
  3. Pezzey, John C.V., 2001. "Distributing the Value of a Country’s Tradeable Carbon Permits," 2001 Conference (45th), January 23-25, 2001, Adelaide 125832, Australian Agricultural and Resource Economics Society.
  4. James Boyce & Matthew Riddle & Mark D. Brenner, 2005. "A Chinese Sky Trust? Distributional Impacts of Carbon charges and Revenue Recycling in China," Working Papers wp_brenner_riddle_boyce, Political Economy Research Institute, University of Massachusetts at Amherst.
  5. Svetlana Maslyuk & Dinusha Dharmaratna, 2011. "Comparative analysis of the existing and proposed ETS," Development Research Unit Working Paper Series 15-11, Monash University, Department of Economics.
  6. Matthew Riddle & James Boyce, 2007. "Cap and Dividend: How to Curb Global Warming while Protecting the Incomes of American Families," Working Papers wp150, Political Economy Research Institute, University of Massachusetts at Amherst.
  7. Brenner, Mark & Riddle, Matthew & Boyce, James K., 2007. "A Chinese sky trust?: Distributional impacts of carbon charges and revenue recycling in China," Energy Policy, Elsevier, vol. 35(3), pages 1771-1784, March.
  8. Lambie, N. Ross, 2009. "The role of real options analysis in the design of a greenhouse gas emissions trading scheme," 2009 Conference (53rd), February 11-13, 2009, Cairns, Australia 47626, Australian Agricultural and Resource Economics Society.

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