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Are Emissions Permits Regressive?

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  • Parry, Ian

    (Resources for the Future)

Abstract

Grandfathered emissions permits redistribute income to wealthy households by creating firm rents that ultimately accrue to shareholders. Consequently, they can be highly regressive, even if the poor do not have large budget shares for polluting goods. Using an analytical model, this paper estimates the burden borne by different income groups when emissions permits are used to control power plant emissions of carbon, SO2, and NOx. We also compare the burden borne by poor households under permits with that under emissions taxes, performance standards, technology mandates, and input taxes. And we show how the social costs of policies differ from efficiency costs when society has aversion to inequality.

Suggested Citation

  • Parry, Ian, 2003. "Are Emissions Permits Regressive?," RFF Working Paper Series dp-03-21, Resources for the Future.
  • Handle: RePEc:rff:dpaper:dp-03-21
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    File URL: http://www.rff.org/RFF/documents/RFF-DP-03-21.pdf
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    More about this item

    Keywords

    equity effects; pollution controls; emissions permits; social welfare function;
    All these keywords.

    JEL classification:

    • Q28 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Government Policy
    • H22 - Public Economics - - Taxation, Subsidies, and Revenue - - - Incidence
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies

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