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

Author

Listed:
  • Mr. John Norregaard
  • Ms. 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

  • Mr. John Norregaard & Ms. Valerie Reppelin, 2000. "Taxes and Tradable Permits As Instruments for Controlling Pollution: Theory and Practice," IMF Working Papers 2000/013, International Monetary Fund.
    • Handle: RePEc:imf:imfwpa:2000/013
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    Citations

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    Cited by:

    1. Abdul Baki, Ghina & Marrouch, Walid, 2022. "Environmental taxation in the Bertrand differentiated duopoly: New insights," Resource and Energy Economics, Elsevier, vol. 70(C).
    2. Rupayan Pal, 2012. "Delegation And Emission Tax In A Differentiated Oligopoly," Manchester School, University of Manchester, vol. 80(6), pages 650-670, December.
    3. 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.
    4. R. Seymore & M. Mabugu & J. H. van Heerden, 2012. "The Welfare Effects of Reversed Border Tax Adjustments as a Remedy under Unilateral Environmental Taxation," Energy & Environment, , vol. 23(8), pages 1209-1220, December.
    5. Philipp R. Steinbrunner, 2022. "Boon or bane? On productivity and environmental regulation," Environmental Economics and Policy Studies, Springer;Society for Environmental Economics and Policy Studies - SEEPS, vol. 24(3), pages 365-396, July.
    6. Latorre, María C. & Gómez-Plana, Antonio G., 2011. "On the differential behaviour of national and multinational firms: A within and across sectors approach," Conference papers 332168, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    7. Sun, Tao & Zhang, Hongwei & Wang, Yuan, 2013. "The application of information entropy in basin level water waste permits allocation in China," Resources, Conservation & Recycling, Elsevier, vol. 70(C), pages 50-54.
    8. Yuan, Qiang & McIntyre, Neil & Wu, Yipeng & Liu, Yichao & Liu, Yi, 2017. "Towards greater socio-economic equality in allocation of wastewater discharge permits in China based on the weighted Gini coefficient," Resources, Conservation & Recycling, Elsevier, vol. 127(C), pages 196-205.
    9. Bo Peng & Kun Lei, 2021. "An Analytical Approach for Initial Allocation of Discharge Permits with Consideration of the Water Environmental Capacity and Industrial Technical Feasibility," Sustainability, MDPI, vol. 13(24), pages 1-16, December.
    10. Miceikienė Astrida & Verulidze Vazha & Kuklierius Mindaugas, 2022. "The Role of Environmental Taxes in Bioeconomy Development: Cases of Lithuania and Georgia," Management Theory and Studies for Rural Business and Infrastructure Development, Sciendo, vol. 44(1), pages 61-71, March.
    11. Daigneault, Adam & Greenhalgh, Suzie & Samarasinghe, Oshadhi, 2017. "Equitably slicing the pie: Water policy and allocation," Ecological Economics, Elsevier, vol. 131(C), pages 449-459.
    12. Rupayan Pal, 2009. "Delegation and Emission Tax in a Differentiated Oligopoly," Working Papers id:2263, eSocialSciences.
    13. David Appels, 2001. "Forest rotation lengths under carbon sequestration payments," Others 0110007, University Library of Munich, Germany.
    14. Sun, Tao & Zhang, Hongwei & Wang, Yuan & Meng, Xiangming & Wang, Chenwan, 2010. "The application of environmental Gini coefficient (EGC) in allocating wastewater discharge permit: The case study of watershed total mass control in Tianjin, China," Resources, Conservation & Recycling, Elsevier, vol. 54(9), pages 601-608.

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