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Efficient CO2 emissions control with emissions taxes and international emissions trading

Listed author(s):
  • Eichner, Thomas
  • Pethig, Rüdiger

We consider a stylized model of the hybrid CO2 emissions control in the EU. A group of countries operates a joint emissions trading system (ETS) covering only part of each country's economy. The countries levy an emissions tax in the rest of their economy and, possibly, an additional tax in their ETS sectors. Welfare-maximizing governments are shown to lack incentives for group-efficient policies. Preexisting taxes overlapping with the ETS lead policy makers to allocate more permits to their ETS sectors than cost effectiveness would suggest. The cases of 'small' and 'large' countries exhibit significantly different efficiency implications.

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File URL: http://www.sciencedirect.com/science/article/pii/S0014-2921(09)00021-X
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Article provided by Elsevier in its journal European Economic Review.

Volume (Year): 53 (2009)
Issue (Month): 6 (August)
Pages: 625-635

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Handle: RePEc:eee:eecrev:v:53:y:2009:i:6:p:625-635
Contact details of provider: Web page: http://www.elsevier.com/locate/eer

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  1. de Bovenberg, A Lans & Mooij, Ruud A, 1994. "Environmental Levies and Distortionary Taxation," American Economic Review, American Economic Association, vol. 84(4), pages 1085-1089, September.
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  3. Gernot Klepper & Sonja Peterson, 2004. "The EU Emissions Trading Scheme. Allowance Prices, Trade Flows, Competitiveness Effects," Working Papers 2004.49, Fondazione Eni Enrico Mattei.
  4. Jos Sijm, 2005. "The interaction between the EU emissions trading scheme and national energy policies," Climate Policy, Taylor & Francis Journals, vol. 5(1), pages 79-96, January.
  5. James R. Markusen, 1975. "Cooperative Control of International Pollution and Common Property Resources," The Quarterly Journal of Economics, Oxford University Press, vol. 89(4), pages 618-632.
  6. Steven Sorrell, 2003. "Carbon Trading in the Policy Mix," Oxford Review of Economic Policy, Oxford University Press, vol. 19(3), pages 420-437.
  7. Hoel, Michael, 1996. "Should a carbon tax be differentiated across sectors?," Journal of Public Economics, Elsevier, vol. 59(1), pages 17-32, January.
  8. Rauscher, Michael, 1994. "On Ecological Dumping," Oxford Economic Papers, Oxford University Press, vol. 46(0), pages 822-840, Supplemen.
  9. Klepper, Gernot & Peterson, Sonja, 2004. "The EU emissions trading scheme allowance prices, trade flows and competitiveness effects," Open Access Publications from Kiel Institute for the World Economy 3270, Kiel Institute for the World Economy (IfW).
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