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Output-based allocation and output-based rebates: a survey

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  • Philippe Quirion

    (CIRED - Centre International de Recherche sur l'Environnement et le Développement - Cirad - Centre de Coopération Internationale en Recherche Agronomique pour le Développement - EHESS - École des hautes études en sciences sociales - AgroParisTech - ENPC - École des Ponts ParisTech - Université Paris-Saclay - CNRS - Centre National de la Recherche Scientifique)

Abstract

Output-based refunding consists in distributing the value of taxes on pollution, or that of tradable emission allowances, to operators of emitting facilities, in proportion of their current production level. It is called output-based rebating in the case of taxes and output-based allocation in the case of tradable emission allowances. This practice is widespread, especially in climate policies, and has important economic consequences. We analyse these consequences, first in a deterministic setting and then accounting for uncertainty. While output-based refunding is detrimental to welfare in a deterministic, closed economy without prior distortions, it also provides some benefits. In particular, it is an efficient way to limit carbon leakage. Then, we present the implementation of output-based allocation in the European Union, California, China, New-Zealand and Alberta, and discuss whether it should be maintained or phased out in the coming decades.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Philippe Quirion, 2022. "Output-based allocation and output-based rebates: a survey," Post-Print hal-03921050, HAL.
    • Handle: RePEc:hal:journl:hal-03921050
    Note: View the original document on HAL open archive server: https://hal.science/hal-03921050
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    References listed on IDEAS

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    Cited by:

    1. Ambec, Stefan, 2022. "The European Union’s Carbon Border Adjustment Mechanism: Challenges and Perspectives," TSE Working Papers 22-1365, Toulouse School of Economics (TSE).

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    JEL classification:

    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy
    • Q52 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Pollution Control Adoption and Costs; Distributional Effects; Employment Effects

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