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The Distributional Effects of Carbon Regulation: Why Auctioned Carbon Permits are Attractive and Feasible

  • Peter Cramton

    ()

    (Economics Department, University of Maryland)

  • Suzi Kerr

    ()

We examine the distributional effects of carbon regulation. An auction of carbon permits is the best way to achieve carbon caps set by international negotiation to limit global climate change. An auction is preferred to grandfathering (giving polluters permits in proportion to past pollution), because it allows reduced tax distortions, provides more flexibility in distribution of costs, provides greater incentives for innovation, and reduces the need for politically contentious arguments over the allocation of rents.

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File URL: http://www.cramton.umd.edu/papers1995-1999/99ee-distributional-effects-of-carbon-regulation.pdf
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Paper provided by University of Maryland, Department of Economics - Peter Cramton in its series Papers of Peter Cramton with number 99eedecr.

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Length: 21 pages
Date of creation: 1999
Date of revision: Feb 1998
Publication status: Published in Thomas Sterner, ed., The Market and the Environment, Cheltenham, United Kingdom: Edward Elgar, chapter 12, 1999.
Handle: RePEc:pcc:pccumd:99eedecr
Note: Working Paper
Contact details of provider: Postal: Economics Department, University of Maryland, College Park, MD 20742-7211
Phone: (202) 318-0520
Fax: (202) 318-0520
Web page: http://www.cramton.umd.edu

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  1. Wilson, Robert, 1979. "Auctions of Shares," The Quarterly Journal of Economics, MIT Press, vol. 93(4), pages 675-89, November.
  2. Cason, Timothy N. & Plott, Charles R., 1996. "EPA's New Emissions Trading Mechanism: A Laboratory Evaluation," Journal of Environmental Economics and Management, Elsevier, vol. 30(2), pages 133-160, March.
  3. Ballard, Charles L & Shoven, John B & Whalley, John, 1985. "General Equilibrium Computations of the Marginal Welfare Costs of Taxes in the United States," American Economic Review, American Economic Association, vol. 75(1), pages 128-38, March.
  4. Lawrence M. Ausubel & Peter Cramton, 1995. "Demand Reduction and Inefficiency in Multi-Unit Auctions," Papers of Peter Cramton 98wpdr, University of Maryland, Department of Economics - Peter Cramton, revised 22 Jul 2002.
  5. William R. Cline, 1992. "Economics of Global Warming, The," Peterson Institute Press: All Books, Peterson Institute for International Economics, number 39, March.
  6. Parry Ian W. H., 1995. "Pollution Taxes and Revenue Recycling," Journal of Environmental Economics and Management, Elsevier, vol. 29(3), pages S64-S77, November.
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