IDEAS home Printed from
   My bibliography  Save this paper

Two World Views on Carbon Revenues


  • Burtraw, Dallas

    () (Resources for the Future)

  • Sekar, Samantha

    () (Resources for the Future)


The introduction of a price on carbon dioxide is expected to be more efficient than prescriptive regulation. It also instantiates substantial economic value. Initially programs allocated this value to incumbent firms (grandfathering), but the growing movement toward auctioning or emissions fees makes carbon revenues into a payment for environmental services. This paper asks, to whom should this payment accrue? If the atmosphere resource, as a common property resource, is viewed as the property of government, then the decision of how to use the revenue can be viewed as a fiscal problem, and efficiency considerations dominate. If the atmosphere is viewed as held in common, then the revenue might be considered compensation to owners and delivered as payment to individuals. This decision has efficiency and distributional consequences that affect the political economy and the likelihood and durability of climate policy. We summarize trends among six existing carbon-pricing programs.

Suggested Citation

  • Burtraw, Dallas & Sekar, Samantha, 2013. "Two World Views on Carbon Revenues," Discussion Papers dp-13-32, Resources For the Future.
  • Handle: RePEc:rff:dpaper:dp-13-32

    Download full text from publisher

    File URL:
    Download Restriction: no

    References listed on IDEAS

    1. Burtraw, Dallas & Sweeney, Richard & Walls, Margaret, 2009. "The Incidence of U.S. Climate Policy: Alternative Uses of Revenues From a Cap-and-Trade Auction," National Tax Journal, National Tax Association, vol. 62(3), pages 497-518, September.
    2. Matthew Riddle & James Boyce, 2007. "Cap and Dividend: How to Curb Global Warming while Protecting the Incomes of American Families," Working Papers wp150, Political Economy Research Institute, University of Massachusetts at Amherst.
    3. Porter, David & Rassenti, Stephen & Shobe, William & Smith, Vernon & Winn, Abel, 2009. "The design, testing and implementation of Virginia's NOx allowance auction," Journal of Economic Behavior & Organization, Elsevier, vol. 69(2), pages 190-200, February.
    4. A. Mitchell Polinsky, 1972. "Probabilistic Compensation Criteria," The Quarterly Journal of Economics, Oxford University Press, vol. 86(3), pages 407-425.
    5. Bovenberg, A. Lans & Goulder, Lawrence H., 2002. "Environmental taxation and regulation," Handbook of Public Economics,in: A. J. Auerbach & M. Feldstein (ed.), Handbook of Public Economics, edition 1, volume 3, chapter 23, pages 1471-1545 Elsevier.
    6. Dallas Burtraw & Karen Palmer, 2008. "Compensation rules for climate policy in the electricity sector," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 27(4), pages 819-847.
    7. Ken Binmore & Paul Klemperer, 2002. "The Biggest Auction Ever: the Sale of the British 3G Telecom Licences," Economic Journal, Royal Economic Society, vol. 112(478), pages 74-96, March.
    8. Bromley, Daniel W., 1995. "Property rights and natural resource damage assessments," Ecological Economics, Elsevier, vol. 14(2), pages 129-135, August.
    9. A. Lans Bovenberg & Lawrence H. Goulder & Derek J. Gurney, 2005. "Efficiency Costs of Meeting Industry-Distributional Constraints Under Environmental Permits and Taxes," RAND Journal of Economics, The RAND Corporation, vol. 36(4), pages 950-970, Winter.
    10. Tversky, Amos & Thaler, Richard H, 1990. "Anomalies: Preference Reversals," Journal of Economic Perspectives, American Economic Association, vol. 4(2), pages 201-211, Spring.
    11. Parry, Ian W. H. & Williams, Roberton III & Goulder, Lawrence H., 1999. "When Can Carbon Abatement Policies Increase Welfare? The Fundamental Role of Distorted Factor Markets," Journal of Environmental Economics and Management, Elsevier, vol. 37(1), pages 52-84, January.
    12. John Pezzey & Andrew Park, 1998. "Reflections on the Double Dividend Debate," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 11(3), pages 539-555, April.
    13. Colin F. Camerer & Howard Kunreuther, 1989. "Decision processes for low probability events: Policy implications," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 8(4), pages 565-592.
    14. Spulber, Daniel F., 1985. "Effluent regulation and long-run optimality," Journal of Environmental Economics and Management, Elsevier, vol. 12(2), pages 103-116, June.
    Full references (including those not matched with items on IDEAS)


    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.

    Cited by:

    1. Vera, Sonia & Sauma, Enzo, 2015. "Does a carbon tax make sense in countries with still a high potential for energy efficiency? Comparison between the reducing-emissions effects of carbon tax and energy efficiency measures in the Chile," Energy, Elsevier, vol. 88(C), pages 478-488.
    2. Dormady, Noah C., 2014. "Carbon auctions, energy markets & market power: An experimental analysis," Energy Economics, Elsevier, vol. 44(C), pages 468-482.

    More about this item


    auction; cap and trade; emissions fee; emissions tax; allocation; grandfathering; climate change; policy;

    JEL classification:

    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • N5 - Economic History - - Agriculture, Natural Resources, Environment and Extractive Industries
    • P48 - Economic Systems - - Other Economic Systems - - - Political Economy; Legal Institutions; Property Rights; Natural Resources; Energy; Environment; Regional Studies

    NEP fields

    This paper has been announced in the following NEP Reports:


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:rff:dpaper:dp-13-32. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Webmaster). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.