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Taxing international emissions trading

  • Valeria Costantini
  • Alessio D'Amato
  • Chiara Martini
  • Maria Cristina Tommasino
  • Edilio Valentini
  • Mariangela Zoli

Most tradable permit regimes have ignored the role of emission allowance taxation whereas the OECD and the European Union have emphasized the need for further investigation of the related efficiency and effectiveness consequences. The aim of our paper is to take a first step in this direction. We illustrate a theoretical model featuring I representative competitive firms/countries. Our theoretical results show that accounting for permit taxation implies a distortion in the equilibrium price as well as an impact on emissions distribution across countries. The specific features of these distortions are then investigated through a Computable General Equilibrium model in which several options for taxes on net sellers’ permit revenues and defiscalization of net buyers’ permit costs are simulated. Welfare analysis is performed, suggesting that the design of permit taxation is relevant in determining how welfare gains and losses are distributed across countries.

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File URL: http://dipeco.uniroma3.it/public/WP%20143%20(2)%202011.pdf
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Paper provided by Department of Economics - University Roma Tre in its series Departmental Working Papers of Economics - University 'Roma Tre' with number 0143.

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Date of creation: Dec 2011
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Handle: RePEc:rtr:wpaper:0143
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  6. Brechet, Thierry & Peralta, Susana, 2007. "The Race for Polluting Permits," CEPR Discussion Papers 6209, C.E.P.R. Discussion Papers.
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  12. Odd Godal & Bjart Holtsmark, 2011. "Permit Trading: Merely an Efficiency‐Neutral Redistribution away from Climate‐Change Victims?," Scandinavian Journal of Economics, Wiley Blackwell, vol. 113(4), pages 784-797, December.
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  20. Martin Altemeyer-Bartscher & Anil Markandya & Dirk T. G. Rübbelke, 2014. "International Side-payments to Improve Global Public Good Provision when Transfers are Refinanced through a Tax on Local and Global Externalities," International Economic Journal, Taylor & Francis Journals, vol. 28(1), pages 71-93, March.
  21. Ekins, Paul & Pollitt, Hector & Barton, Jennifer & Blobel, Daniel, 2011. "The implications for households of environmental tax reform (ETR) in Europe," Ecological Economics, Elsevier, vol. 70(12), pages 2472-2485.
  22. Paul Ekins & Philip Summerton & Chris Thoung & Daniel Lee, 2011. "A Major Environmental Tax Reform for the UK: Results for the Economy, Employment and the Environment," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 50(3), pages 447-474, November.
  23. Fankhauser, Samuel & Martin, Nat, 2010. "The economics of the CDM levy: Revenue potential, tax incidence and distortionary effects," Energy Policy, Elsevier, vol. 38(1), pages 357-363, January.
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  25. Ethan Yale, 2008. "Taxing Cap-and-Trade Environmental Regulation," The Journal of Legal Studies, University of Chicago Press, vol. 37(2), pages 535-550, 06.
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  27. Welsch, Heinz, 2008. "Armington elasticities for energy policy modeling: Evidence from four European countries," Energy Economics, Elsevier, vol. 30(5), pages 2252-2264, September.
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