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|
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"Jeux Sans Frontieres: Tax Competition and Tax Coordination when Countries Differ in Size,"
819, Queen's University, Department of Economics.
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- Helm, Carsten, 2003. "International emissions trading with endogenous allowance choices," Journal of Public Economics, Elsevier, vol. 87(12), pages 2737-2747, December.
- 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.
- repec:ntj:journl:v:52:y:1999:i:n._2:p:269-304 is not listed on IDEAS
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