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Intensity-Based Rebating of Emission Pricing Revenues

Author

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  • Christoph Böhringer

    (University of Oldenburg, Department of Economics)

  • Carolyn Fischer
  • Nicholas Rivers

    (University of Ottawa)

Abstract

Carbon pricing policies worldwide are increasingly coupled with direct or indi-rect subsidies where emissions pricing revenues are rebated to the regulated enti-ties. This paper analyzes the incentives created by two novel forms of rebating that reward additional emission intensity reductions: one given in proportion to output (intensity-based output rebating) and another that rebates a share of emission pay-ments (intensity-based emission rebating). These forms are contrasted with output-based rebating, abatement-based rebating, and lump sum rebating. Given the same emission price, intensity-based output rebating incentivizes the most intensity reduc-tions, while abatement-based rebating incentivizes the most output reductions, and output-based rebating puts the least pressure on output (and emissions); intensity-based emissions rebating lies in between these, by implicitly subsidizing emissions while incentivizing intensity reductions. The paper supplements partial equilibrium theoretical analysis with numerical simulations to assess the performance of di?erent mechanisms in a multisector general equilibrium model that accounts for economywide market interactions.

Suggested Citation

  • Christoph Böhringer & Carolyn Fischer & Nicholas Rivers, 2022. "Intensity-Based Rebating of Emission Pricing Revenues," Working Papers V-439-22, University of Oldenburg, Department of Economics, revised May 2022.
    • Handle: RePEc:old:dpaper:439
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    References listed on IDEAS

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    Cited by:

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    2. Ferguson, Shon & Heijmans, Roweno J.R.K., 2023. "Climate Policy and Trade in Polluting Technologies," Working Paper Series 1470, Research Institute of Industrial Economics.

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    More about this item

    Keywords

    Climate change; policy; carbon pricing;
    All these keywords.

    JEL classification:

    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • D58 - Microeconomics - - General Equilibrium and Disequilibrium - - - Computable and Other Applied General Equilibrium Models
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy

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