The race for polluting permits
International markets for tradable emission permits (TEP) co-exist with national energy taxation. A firm trading emission permits in the international market also pays energy taxes in its host country, thus creating an interaction between the international TEP-market and national energy taxes. In this paper we model that interaction in a framework of a perfectly competitive international TEP-market, where heterogeneous firms trade their TEP endowments. National governments set energy taxes non-cooperatively so as to maximize fiscal revenue from energy and profit taxes. We identify the driving forces behind Nash equilibrium taxes. We show how they depend on the total amount of TEPs in the market, on firms TEP-endowment and on thenumber of participating countries. We also show how energy taxation varies with the introduction of the market on a previously unregulated world. Finally, we highlight the fact that the TEP-market does not achieve abatement cost efficiency, despite itsbeing perfectly competitive.
|Date of creation:||01 Mar 2007|
|Contact details of provider:|| Postal: Voie du Roman Pays 34, 1348 Louvain-la-Neuve (Belgium)|
Fax: +32 10474304
Web page: http://www.uclouvain.be/core
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Peralta, Susana & van Ypersele, Tanguy, 2005. "Factor endowments and welfare levels in an asymmetric tax competition game," Journal of Urban Economics, Elsevier, vol. 57(2), pages 258-274, March.
- Santore, Rudy & Robison, H. David & Klein, Yehuda, 2001. "Strategic state-level environmental policy with asymmetric pollution spillovers," Journal of Public Economics, Elsevier, vol. 80(2), pages 199-224, May.
- Montgomery, W. David, 1972. "Markets in licenses and efficient pollution control programs," Journal of Economic Theory, Elsevier, vol. 5(3), pages 395-418, December.
- Wilson, John Douglas, 1999. "Theories of Tax Competition," National Tax Journal, National Tax Association, vol. 52(2), pages 269-304, June.
- Laussel, Didier & Le Breton, Michel, 1998. "Existence of Nash equilibria in fiscal competition models," Regional Science and Urban Economics, Elsevier, vol. 28(3), pages 283-296, May.
- Helm, Carsten, 2003. "International emissions trading with endogenous allowance choices," Journal of Public Economics, Elsevier, vol. 87(12), pages 2737-2747, December.
- Kanbur, Ravi & Keen, Michael, 1993.
"Jeux Sans Frontieres: Tax Competition and Tax Coordination When Countries Differ in Size,"
American Economic Review,
American Economic Association, vol. 83(4), pages 877-892, September.
- Ravi Kanbur & Michael Keen, 1991. "Jeux Sans Frontieres: Tax Competition and Tax Coordination when Countries Differ in Size," Working Papers 819, Queen's University, Department of Economics.
- DePeter James A. & Myers Gordon M., 1994. "Strategic Capital Tax Competition: A Pecuniary Externality and a Corrective Device," Journal of Urban Economics, Elsevier, vol. 36(1), pages 66-78, July.
- Goulder Lawrence H., 1995. "Effects of Carbon Taxes in an Economy with Prior Tax Distortions: An Intertemporal General Equilibrium Analysis," Journal of Environmental Economics and Management, Elsevier, vol. 29(3), pages 271-297, November.
- Wilson, John Douglas, 1999. "Theories of Tax Competition," National Tax Journal, National Tax Association, vol. 52(n. 2), pages 269-304, June. Full references (including those not matched with items on IDEAS)