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Taxes and Tradable Permits As Instruments for Controlling Pollution; Theory and Practice

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  • John Norregaard
  • Valerie Reppelin

Abstract

This paper examines the relative merits of two dominant economic instruments for reducing pollution—”green” taxes and tradable permits. Theoretically, the two instruments share many similarities, and on balance, neither seems preferable to the other. In practice, however, most countries have relied more on taxes than on permits to control pollution. The analysis suggests a number of lessons to be learned from country experiences regarding the design and implementation of both instruments. While many, particularly European countries, currently have long-term programs involving environmental taxes, a willingness to experiment with tradable permits seems to be growing, especially given the Kyoto protocol emission targets.

Suggested Citation

  • John Norregaard & Valerie Reppelin, 2000. "Taxes and Tradable Permits As Instruments for Controlling Pollution; Theory and Practice," IMF Working Papers 00/13, International Monetary Fund.
  • Handle: RePEc:imf:imfwpa:00/13
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    Cited by:

    1. Rupayan Pal, 2012. "Delegation And Emission Tax In A Differentiated Oligopoly," Manchester School, University of Manchester, vol. 80(6), pages 650-670, December.
    2. Kampas, Athanasios & White, Ben, 2003. "Selecting permit allocation rules for agricultural pollution control: a bargaining solution," Ecological Economics, Elsevier, vol. 47(2-3), pages 135-147, December.
    3. Daigneault, Adam & Greenhalgh, Suzie & Samarasinghe, Oshadhi, 2017. "Equitably slicing the pie: Water policy and allocation," Ecological Economics, Elsevier, vol. 131(C), pages 449-459.
    4. Rupayan Pal, 2009. "Delegation and Emission Tax in a Differentiated Oligopoly," Working Papers id:2263, eSocialSciences.
    5. David Appels, 2001. "Forest rotation lengths under carbon sequestration payments," Others 0110007, EconWPA.

    More about this item

    Keywords

    Environment; Taxes; Environmental taxes; tradable permits; emission; pollution; emission tax; emission taxes;

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