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Are Emissions Permits Regressive?

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  • Parry, Ian

    () (Resources for the Future)

Abstract

Grandfathered emissions permits redistribute income to wealthy households by creating firm rents that ultimately accrue to shareholders. Consequently, they can be highly regressive, even if the poor do not have large budget shares for polluting goods. Using an analytical model, this paper estimates the burden borne by different income groups when emissions permits are used to control power plant emissions of carbon, SO2, and NOx. We also compare the burden borne by poor households under permits with that under emissions taxes, performance standards, technology mandates, and input taxes. And we show how the social costs of policies differ from efficiency costs when society has aversion to inequality.

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Bibliographic Info

Paper provided by Resources For the Future in its series Discussion Papers with number dp-03-21.

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Date of creation: 01 Jun 2003
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Handle: RePEc:rff:dpaper:dp-03-21

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Keywords: equity effects; pollution controls; emissions permits; social welfare function;

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