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Tax-versus-trading and efficient revenue recycling as issues for greenhouse gas abatement

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  • Pezzey, John C.V.
  • Jotzo, Frank

Abstract

We give empirical welfare results for global greenhouse gas emission abatement, using the first multi-party model to include both tax-versus-trading under uncertainties, and revenue recycling. Including multiple, independent parties greatly reduces the welfare advantage of an emissions tax over emissions (permit) trading in handling abatement-cost uncertainties, from that shown by existing, single-party literature. But a previously ignored and much bigger advantage of a tax, from better handling uncertainties in business-as-usual emissions, greatly boosts the overall tax-versus-trading advantage. Yet the degree to which each mechanism is used to raise and recycle revenue efficiently by lowering distortionary taxes – rather than recycle revenue as lump sums, or not raise revenue by giving tax thresholds or free permits – may in turn dominate any tax-versus-trading advantage. Choosing the best greenhouse abatement mechanism should thus consider the issues of tax-versus-trading and efficient revenue recycling together.

Suggested Citation

  • Pezzey, John C.V. & Jotzo, Frank, 2012. "Tax-versus-trading and efficient revenue recycling as issues for greenhouse gas abatement," Journal of Environmental Economics and Management, Elsevier, vol. 64(2), pages 230-236.
  • Handle: RePEc:eee:jeeman:v:64:y:2012:i:2:p:230-236
    DOI: 10.1016/j.jeem.2012.02.006
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    References listed on IDEAS

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    Cited by:

    1. Simon Quemin & Christian de Perthuis, 2017. "Transitional restricted linkage between Emissions Trading Schemes," Working Papers 1701, Chaire Economie du climat.
    2. Wood, Peter J. & Heindl, Peter & Jotzo, Frank & Löschel, Andreas, 2013. "Linking price and quantity pollution controls under uncertainty," ZEW Discussion Papers 13-025, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
    3. Peter Heindl & Peter J. Wood & Frank Jotzo, 2014. "Combining International Cap-and-Trade with National Carbon Taxes," CCEP Working Papers 1418, Centre for Climate Economics & Policy, Crawford School of Public Policy, The Australian National University.
    4. Frédéric Branger & Philippe Quirion, 2014. "Price versus Quantities versus Indexed Quantities," Working Papers 2014.85, Fondazione Eni Enrico Mattei.
    5. Roger Adkins & Dean Paxson, 2016. "Subsidies for Renewable Energy Facilities under Uncertainty," Manchester School, University of Manchester, vol. 84(2), pages 222-250, March.
    6. Massimiliano Corradini & Valeria Costantini & Anil Markandya & Elena Paglialunga & Giorgia Sforna, 2018. "Some reflections on policy mix in the EU low-carbon strategy," Departmental Working Papers of Economics - University 'Roma Tre' 0236, Department of Economics - University Roma Tre.
    7. Liu, Yu & Lu, Yingying, 2015. "The Economic impact of different carbon tax revenue recycling schemes in China: A model-based scenario analysis," Applied Energy, Elsevier, vol. 141(C), pages 96-105.
    8. repec:eee:jeeman:v:88:y:2018:i:c:p:366-378 is not listed on IDEAS

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