An Efficient Mechanism to Control Correlated Externalities: Redistributive Transfers and the Coexistence of Regional and Global Pollution Permit Markets
AbstractWe compare tradable permit markets and emission taxes as self-enforcing mechanisms to control correlated externality problems. By “correlated” we mean multiple pollutants that are jointly produced by a single source but which simultaneously cause differentiated regional and global externalities (e.g., smog and global warming). By “self-enforcing” we mean mechanisms that account for the endogeneity that exists between competing jurisdictions in the setting of environmental policy within a federation of regions. We find that joint domestic and international permit markets are Pareto efficient, while joint emissions taxes are not.
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Bibliographic InfoPaper provided by Utah State University, Department of Economics in its series Working Papers with number 2002-23.
Length: 35 pages
Date of creation: Dec 2002
Date of revision:
Other versions of this item:
- Caplan, Arthur J. & Silva, Emilson C.D., 2005. "An efficient mechanism to control correlated externalities: redistributive transfers and the coexistence of regional and global pollution permit markets," Journal of Environmental Economics and Management, Elsevier, vol. 49(1), pages 68-82, January.
- C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
- D62 - Microeconomics - - Welfare Economics - - - Externalities
- D78 - Microeconomics - - Analysis of Collective Decision-Making - - - Positive Analysis of Policy Formulation and Implementation
- H41 - Public Economics - - Publicly Provided Goods - - - Public Goods
- H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism
- Q28 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Government Policy
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