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Output-Based Refunding of Emission Payments: Theory, Distribution of Costs, and International Experience

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  • Sterner, Thomas
  • Hoglund, Lena

Abstract

In this paper, we discuss the effect of refunding environmental charges. Taxes often are resisted by polluters because they imply both abatement and tax costs. We show that when charges are refunded, the incentives for abatement are essentially the same as for a tax, but the output reduction that often accompanies a tax scheme is forgone. We describe and examine the refund emissions payment (REP) scheme as a policy instrument for emissions abatement and compare it with taxes and permits with regard to allocative properties, distribution of costs, property rights, and, consequently, the politics of implementation. As an empirical example, the Swedish charge on nitrogen oxides is analyzed.

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  • Sterner, Thomas & Hoglund, Lena, 2000. "Output-Based Refunding of Emission Payments: Theory, Distribution of Costs, and International Experience," RFF Working Paper Series dp-00-29, Resources for the Future.
    • Handle: RePEc:rff:dpaper:dp-00-29
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    Cited by:

    1. Burtraw, Dallas & Palmer, Karen & Heintzelman, Martin, 2000. "Electricity Restructuring: Consequences and Opportunities for the Environment," RFF Working Paper Series dp-00-39, Resources for the Future.
    2. Katrin Millock & Céline Nauges & Thomas Sterner, 2004. "Environmental Taxes: A Comparison of French and Swedish Experience from Taxes on Industrial Air Pollution," ifo DICE Report, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 2(1), pages 30-34, 04.
    3. Meredith Fowlie & Mar Reguant & Stephen P. Ryan, 2016. "Market-Based Emissions Regulation and Industry Dynamics," Journal of Political Economy, University of Chicago Press, vol. 124(1), pages 249-302.
    4. Palmer, Karen & Burtraw, Dallas, 2005. "Cost-effectiveness of renewable electricity policies," Energy Economics, Elsevier, vol. 27(6), pages 873-894, November.
    5. Burtraw, Dallas & Palmer, Karen L. & Kahn, Danny, 2005. "Allocation of CO2 Emissions Allowances in the Regional Greenhouse Gas Cap-and-Trade Program," Discussion Papers 10650, Resources for the Future.
    6. Katrin Millock & Céline Nauges, 2003. "The French Tax on Air Pollution: Some Preliminary Results on its Effectiveness," Working Papers 2003.44, Fondazione Eni Enrico Mattei.
    7. Johnson, Kenneth C., 2007. "Refunded emission taxes: A resolution to the cap-versus-tax dilemma for greenhouse gas regulation," Energy Policy, Elsevier, vol. 35(5), pages 3115-3118, May.
    8. Katia Karousakis & Phoebe Koundouri & Dionysis Assimacopoulos & Paul Jeffrey & Manfred Lange, 2006. "Conclusions and policy recommendations for the E.U. Water Framework Directive," DEOS Working Papers 0602, Athens University of Economics and Business.
    9. Fischer, Carolyn, 2001. "Rebating Environmental Policy Revenues: Output-Based Allocations and Tradable Performance Standards," Discussion Papers 10709, Resources for the Future.
    10. Fischer, Carolyn & Bernard, Alain & Vielle, Marc, 2001. "Is There a Rationale for Rebating Environmental Levies?," RFF Working Paper Series dp-01-31-, Resources for the Future.
    11. Maia David, 2005. "Regulating a Polluting Oligopoly: Emission Tax or Voluntary Agreement?," Review of Development Economics, Wiley Blackwell, vol. 9(4), pages 514-529, November.
    12. Johnson, Kenneth C., 2006. "Feebates: An effective regulatory instrument for cost-constrained environmental policy," Energy Policy, Elsevier, vol. 34(18), pages 3965-3976, December.
    13. Burtraw, Dallas & Palmer, Karen L. & Bharvirkar, Ranjit & Paul, Anthony, 2001. "The Effect of Allowance Allocation on the Cost of Carbon Emission Trading," Discussion Papers 10536, Resources for the Future.
    14. Carlsson, Fredrik & Hammar, Henrik, 2002. "Incentive-based regulation of CO2 emissions from international aviation," Journal of Air Transport Management, Elsevier, vol. 8(6), pages 365-372.
    15. Orlov, Anton & Grethe, Harald, 2012. "Carbon taxation and market structure: A CGE analysis for Russia," Energy Policy, Elsevier, vol. 51(C), pages 696-707.
    16. Xenophon, Aleksis Kazubiernis & Hill, David John, 2019. "Emissions reduction and wholesale electricity price targeting using an output-based mechanism," Applied Energy, Elsevier, vol. 242(C), pages 1050-1063.
    17. Isaksson, Lena Hoglund, 2005. "Abatement costs in response to the Swedish charge on nitrogen oxide emissions," Journal of Environmental Economics and Management, Elsevier, vol. 50(1), pages 102-120, July.
    18. Felder, Stefan & Schleiniger, Reto, 2002. "Environmental tax reform: efficiency and political feasibility," Ecological Economics, Elsevier, vol. 42(1-2), pages 107-116, August.

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