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Implementing optimal taxes using tradable share permits

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  • Berglann, Helge

Abstract

This paper presents a simple system for efficient regulation under asymmetric information. Each firm's income is controlled by a tax that depends on the firm's own output and on a parameter construed as a share permit. These “shares of total expected output” lower a firm's tax burden and are acquired in a competitive market. By employing this scheme, the planner only requires knowledge of marginal damage to induce the first-best outcome. Relative to a traditional cap-and-trade approach the system increases expected social welfare.

Suggested Citation

  • Berglann, Helge, 2012. "Implementing optimal taxes using tradable share permits," Journal of Environmental Economics and Management, Elsevier, vol. 64(3), pages 402-409.
  • Handle: RePEc:eee:jeeman:v:64:y:2012:i:3:p:402-409
    DOI: 10.1016/j.jeem.2012.04.005
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    References listed on IDEAS

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    Cited by:

    1. Guy Meunier & Juan-Pablo Montero & Jean-Pierre Ponssard, 2016. "Output-based allocations in pollution markets with uncertainty and self-selection," Working Papers hal-01321372, HAL.

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