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The political economy of refunded emissions payment programs

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  • Fredriksson, Per G.
  • Sterner, Thomas

Abstract

Lobbying by pollution firms is commonly viewed as having a negative impact on the stringency of environmental policy. We ask whether lobbying instead can bring about stricter environmental policy, and how imperfect property rights affect the policy outcome. We study the effects on the equilibrium pollution tax of refunding all tax payments to the polluting firms. Relatively clean firms may be induced to lobby for a higher pollution levy. However, this incentive declines when the property rights over the accumulated funds are insecure.
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Suggested Citation

  • Fredriksson, Per G. & Sterner, Thomas, 2005. "The political economy of refunded emissions payment programs," Economics Letters, Elsevier, vol. 87(1), pages 113-119, April.
  • Handle: RePEc:eee:ecolet:v:87:y:2005:i:1:p:113-119
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    1. Grossman, Gene M & Helpman, Elhanan, 1994. "Protection for Sale," American Economic Review, American Economic Association, vol. 84(4), pages 833-850, September.
    2. Fischer, Carolyn, 2011. "Market power and output-based refunding of environmental policy revenues," Resource and Energy Economics, Elsevier, vol. 33(1), pages 212-230, January.
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    Cited by:

    1. Sterner, Thomas & Muller, Adrian, 2006. "Output and Abatement Effects of Allocation Readjustment in Permit Trade," Discussion Papers dp-06-49, Resources For the Future.
    2. Coria, Jessica & Mohlin, Kristina, 2017. "On Refunding of Emission Taxes and Technology Diffusion," Strategic Behavior and the Environment, now publishers, vol. 6(3), pages 205-248, March.
    3. Last Name, First Name, 2008. "Innovation and Diffusion of Environmental Technology: Industrial NOx Abatement in Sweden under Refunded Emission Payments," Discussion Papers dp-08-02, Resources For the Future.
    4. MacKenzie, Ian A. & Ohndorf, Markus, 2012. "Cap-and-trade, taxes, and distributional conflict," Journal of Environmental Economics and Management, Elsevier, vol. 63(1), pages 51-65.
    5. repec:now:jnlsbe:102.00000071 is not listed on IDEAS
    6. Yu-Bong Lai, 2009. "Is a Double Dividend Better than a Single Dividend?," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 165(2), pages 342-363, June.
    7. McKitrick, Ross & Lee, Jamie, 2017. "Forming a Majority Coalition for Carbon Taxes under a State-Contingent Updating Rule," Strategic Behavior and the Environment, now publishers, vol. 6(4), pages 289-309, November.
    8. K. C. Fung & Chelsea C. Lin & Ray-Yun Chang, 2009. "The Political Economy of Strategic Trade Policies," Review of International Economics, Wiley Blackwell, vol. 17(3), pages 494-509, August.
    9. Aidt, Toke S., 2010. "Green taxes: Refunding rules and lobbying," Journal of Environmental Economics and Management, Elsevier, vol. 60(1), pages 31-43, July.
    10. Susumu Cato, 2010. "Emission Taxes and Optimal Refunding Schemes with Endogenous Market Structure," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 46(3), pages 275-280, July.
    11. Sterner, Thomas & Hoglund Isaksson, Lena, 2006. "Refunded emission payments theory, distribution of costs, and Swedish experience of NOx abatement," Ecological Economics, Elsevier, vol. 57(1), pages 93-106, April.
    12. Pierre-André Jouvet & Fabien Prieur, 2006. "Permis de pollution et contraintes politiques dans un modèle à générations imbriquées," EconomiX Working Papers 2006-21, University of Paris Nanterre, EconomiX.
    13. Bonilla, Jorge & Coria, Jessica & Mohlin, Kristina & Sterner, Thomas, 2015. "Refunded emission payments and diffusion of NOx abatement technologies in Sweden," Ecological Economics, Elsevier, vol. 116(C), pages 132-145.
    14. Alesina, Alberto & Passarelli, Francesco, 2014. "Regulation versus taxation," Journal of Public Economics, Elsevier, vol. 110(C), pages 147-156.
    15. Hagem, Cathrine & Hoel, Michael & Holtsmark, Bjart & Sterner, Thomas, 2015. "Refunding Emissions Payments," Discussion Papers dp-15-05, Resources For the Future.
    16. Cathrine Hagem & Bjart Holtsmark & Thomas Sterner, 2012. "Mechanism design for refunding emissions payment," Discussion Papers 705, Statistics Norway, Research Department.
    17. Strunz, Sebastian & Schindler, Harry, 2017. "Identifying barriers towards a post-growth economy: A political economy view," UFZ Discussion Papers 6/2017, Helmholtz Centre for Environmental Research (UFZ), Division of Social Sciences (ÖKUS).
    18. Divya Datt & Meeta Keswani Mehra, 2016. "Environmental Policy in a Federation with Special Interest Politics and Inter-Governmental Grants," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 64(4), pages 575-595, August.
    19. Yuanguang Yu, 2012. "An Optimal Ad Valorem Tax/Subsidy with an Output-Based Refunded Emission Payment for Permits Auction in an Oligopoly Market," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 52(2), pages 235-248, June.

    More about this item

    JEL classification:

    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • D78 - Microeconomics - - Analysis of Collective Decision-Making - - - Positive Analysis of Policy Formulation and Implementation
    • Q28 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Government Policy

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