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Taxing international emissions trading

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  • Valeria Costantini
  • Alessio D'Amato
  • Chiara Martini
  • Maria Cristina Tommasino
  • Edilio Valentini
  • Mariangela Zoli

Abstract

Most tradable permit regimes have ignored the role of emission allowance taxation whereas the OECD and the European Union have emphasized the need for further investigation of the related efficiency and effectiveness consequences. The aim of our paper is to take a first step in this direction. We illustrate a theoretical model featuring I representative competitive firms/countries. Our theoretical results show that accounting for permit taxation implies a distortion in the equilibrium price as well as an impact on emissions distribution across countries. The specific features of these distortions are then investigated through a Computable General Equilibrium model in which several options for taxes on net sellers’ permit revenues and defiscalization of net buyers’ permit costs are simulated. Welfare analysis is performed, suggesting that the design of permit taxation is relevant in determining how welfare gains and losses are distributed across countries.

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Bibliographic Info

Paper provided by Department of Economics - University Roma Tre in its series Departmental Working Papers of Economics - University 'Roma Tre' with number 0143.

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Date of creation: Dec 2011
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Handle: RePEc:rtr:wpaper:0143

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Keywords: international emissions trading; permit taxation; computable general equilibrium;

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References

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Cited by:
  1. Angelo Antoci & Simone Borghesi & Mauro Sodini, 2012. "ETS and Technological Innovation: A Random Matching Model," Working Papers 2012.79, Fondazione Eni Enrico Mattei.

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