Carbon Pricing: Transaction Costs of Emissions Trading vs. Carbon Taxes

Jessica Coria and Jūratė Jaraite-Kažukauskė

No 609, Working Papers in Economics from University of Gothenburg, Department of Economics

Abstract: In this paper we empirically compare the transaction costs from monitoring, reporting and verification (MRV) of two environmental regulations directed to cost-efficiently reduce greenhouse gas emissions: a carbon dioxide (CO2) tax and a tradable emissions system. We do this in the case of Sweden, where a set of firms are covered by both types of regulations, i.e., the Swedish CO2 tax and the European Union’s Emissions Trading System (EU ETS). This provides us with an excellent case study as it allows us to disentangle the costs of each regulation from other firm-specific variables that might affect the overall cost of MRV procedures. Our results indicate that the MRV costs of CO2 taxation do not depend on firms’ emissions, while they do in the case of the EU ETS. For firms of equivalent emissions’ size, the MRV costs are lower for CO2 taxation than for the EU ETS, which confirms the general view that regulating emissions upstream by means of a CO2 tax yields lower transaction costs vis-á-vis downstream regulation by means of emission trading.

Keywords: Carbon dioxide emissions; Carbon tax; Emissions Trading; EU ETS; Firm-level data; Sweden (search for similar items in EconPapers)
JEL-codes: D23 H23 Q52 Q58 (search for similar items in EconPapers)
Pages: 25 pages
Date: 2015-01
New Economics Papers: this item is included in nep-ene, nep-env, nep-reg and nep-res
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (9)

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Working Paper: Carbon Pricing: Transaction Costs of Emissions Trading vs. Carbon Taxes (2015)
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