Cap-and-Trade or Carbon Taxes? The Feasibility of Enforcement and the Effects of Non-Compliance
One of the proposed alternatives to Kyoto's cap-and-trade approach is a regime based on an internationally harmonized carbon tax. In this paper, we consider and compare the enforcement problems associated with a tax regime and a cap-and-trade regime, respectively. The paper tries to convey two main points. First, both types of regime require an effective enforcement mechanism. However, such a mechanism is unlikely to be adopted as part of a regime with full participation, because the political process leading up to its adoption tends to water down the enforcement mechanism to a point where it no longer has much bite. And even if this is somehow avoided, countries expecting compliance to be difficult or costly will almost certainly decline to sign - not to mention ratify - the resulting agreement. Second, the implications of non-compliance in a tax regime differ in important ways from the corresponding implications in a cap-and-trade regime. In a cap-and-trade regime emissions trading can make inaction legitimate for buyers of emission permits. In particular, overselling of permits by one (or a few) permit exporting countries might completely undermine the regime's environmental effect. In a tax regime, by contrast, one country's non-compliance can not make inaction by other countries legitimate. It follows that an agreement based on a harmonized carbon tax will always have some effect, provided that at least one country complies.
|Date of creation:||Oct 2005|
|Date of revision:|
|Contact details of provider:|| Postal: P.O.Box 8131 Dep, N-0033 Oslo, Norway|
Phone: (+47) 21 09 00 00
Fax: +47 - 62 88 55 95
Web page: http://www.ssb.no/en/
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Hoel, Michael & Karp, Larry, 2001.
"Taxes versus Quotas for a Stock Pollutant,"
Department of Agricultural & Resource Economics, UC Berkeley, Working Paper Series
qt5fx9p7kf, Department of Agricultural & Resource Economics, UC Berkeley.
- Christoph Bohringer, 2002. "Climate Politics from Kyoto to Bonn: From Little to Nothing?," The Energy Journal, International Association for Energy Economics, vol. 0(Number 2), pages 51-71.
- Michael Grubb, 2003. "The Economics of the Kyoto Protocol," World Economics, World Economics, Economic & Financial Publishing, 1 Ivory Square, Plantation Wharf, London, United Kingdom, SW11 3UE, vol. 4(3), pages 143-189, July.
- Pizer, William & Newell, Richard, 1998.
"Regulating Stock Externalities Under Uncertainty,"
dp-99-10-rev, Resources For the Future.
- Hoel, Michael & Karp, Larry, 2001.
"Taxes and quotas for a stock pollutant with multiplicative uncertainty,"
Journal of Public Economics,
Elsevier, vol. 82(1), pages 91-114, October.
- Hoel, Michael & Karp, Larry, 2000. "Taxes and Quotas for a Stock Pollutant with Multiplicative Uncertainty," Department of Agricultural & Resource Economics, UC Berkeley, Working Paper Series qt9v86p5s7, Department of Agricultural & Resource Economics, UC Berkeley.
- Michael Hoel & Larry Karp, 1999. "Taxes and Quotas for a Stock Pollutant with Multiplicative Uncertainty," Working Papers 1999.15, Fondazione Eni Enrico Mattei.
- M. L. Weitzman, 1973.
"Prices vs. Quantities,"
106, Massachusetts Institute of Technology (MIT), Department of Economics.
- Pizer, William, 1997. "Prices vs. Quantities Revisited: The Case of Climate Change," Discussion Papers dp-98-02, Resources For the Future.
- Jon Hovi & Tora Skodvin & Steinar Andresen, 2003. "The Persistence of the Kyoto Protocol: Why Other Annex I Countries Move on Without the United States," Global Environmental Politics, MIT Press, vol. 3(4), pages 1-23, November.
- Haites, Erik & Missfeldt, Fanny, 2004. "Liquidity implications of a commitment period reserve at national and global levels," Energy Economics, Elsevier, vol. 26(5), pages 845-868, September.
- Downs, George W. & Rocke, David M. & Barsoom, Peter N., 1996. "Is the good news about compliance good news about cooperation?," International Organization, Cambridge University Press, vol. 50(03), pages 379-406, June.
- Joseph E. Aldy & Scott Barrett & Robert N. Stavins, 2003.
"Thirteen Plus One: A Comparison of Global Climate Policy Architectures,"
2003.64, Fondazione Eni Enrico Mattei.
- Joseph E. Aldy & Scott Barrett & Robert N. Stavins, 2003. "Thirteen plus one: a comparison of global climate policy architectures," Climate Policy, Taylor & Francis Journals, vol. 3(4), pages 373-397, December.
- Aldy, Joseph & Barrett, Scott & Stavins, Robert, 2003. "Thirteen Plus One: A Comparison of Global Climate Policy Architectures," Working Paper Series rwp03-012, Harvard University, John F. Kennedy School of Government.
- Fanny Missfeldt & Erik Haites, 2002. "Analysis of a commitment period reserve at national and global levels," Climate Policy, Taylor & Francis Journals, vol. 2(1), pages 51-70, March.
When requesting a correction, please mention this item's handle: RePEc:ssb:dispap:436. 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: (L MaasÃ¸)
If references are entirely missing, you can add them using this form.