Land Economics · 2007 · 217 citations · 13 references
Public AffairsEconomicsEnvironmental PolicyEnvironmental EconomicsTax PolicyTaxationEmission PermittingEnvironmental TaxationOptimal TaxationCarbon Leakage MitigationCarbon Leakage PreventionDistortionsDistributional EffectsEmission Permit AuctionsEmissions Allowance AllocationOutput AllocationTradable Emission Permits
Allocation of tradable emissions permits has important efficiency and distributional effects when tax and trade distortions are considered. The study compares different rules for allocating carbon allowances within and among sectors. The comparison evaluates lump-sum grandfathering, output-based allocation (OBA), auctioning, and sectoral distributions based on historical emissions or value-added shares. Output-based allocation mitigates tax interactions, behaves like revenue recycling with auctioning, favors heavier polluters to counteract carbon leakage at higher welfare costs, and makes less energy‑intensive sectors sensitive to allocation rules.
<i>The allocation of tradable emissions permits has important efficiency as well as distributional effects when tax and trade distortions are taken into account. We compare different rules for allocating carbon allowances within sectors (lump-sum grandfathering, output-based allocation (OBA), auctioning) and among sectors (historical emissions or value-added shares). The output subsidies implicit in OBA mitigate tax interactions, unlike grandfathering. OBA with sectoral distributions based on value added is similar to revenue recycling with auctioning. OBA based on historical emissions supports heavier polluters, more effectively counteracting carbon leakage, but at higher welfare costs. Less energy-intensive sectors are also sensitive to allocation rules.</i> (JEL Q 53)
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Combining rate-based and cap-and-trade emissions policies
Carolyn Fischer · Climate Policy · 2003 · 109 citations