Cap-and-Trade or Carbon Taxes? The Feasibility of Enforcement and the Effects of Non-Compliance
One of the proposed alternatives to KyotoÂ’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 Â– not to mention ratify Â– 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 regimeÂ’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) 21 09 49 73
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.:
- 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.
- Pizer, William & Newell, Richard, 1998.
"Regulating Stock Externalities Under Uncertainty,"
dp-99-10-rev, Resources For the Future.
- Hoel, Michael & Karp, Larry, 2002.
"Taxes versus quotas for a stock pollutant,"
Resource and Energy Economics,
Elsevier, vol. 24(4), pages 367-384, November.
- 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 Hoel & Larry Karp, 1999.
"Taxes and Quotas for a Stock Pollutant with Multiplicative Uncertainty,"
1999.15, Fondazione Eni Enrico Mattei.
- 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.
- Martin L. Weitzman, 1974.
"Prices vs. Quantities,"
Review of Economic Studies,
Oxford University Press, vol. 41(4), pages 477-491.
- 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.
- Joseph E. Aldy & Scott Barrett & Robert N. Stavins, 2003.
"Thirteen plus one: a comparison of global climate policy architectures,"
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.
- Joseph E. Aldy & Scott Barrett & Robert N. Stavins, 2003. "Thirteen Plus One: A Comparison of Global Climate Policy Architectures," Working Papers 2003.64, Fondazione Eni Enrico Mattei.
- 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.
- 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.
- 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: (J Bruusgaard)
If references are entirely missing, you can add them using this form.