Are Emissions Permits Regressive?

Ian Parry

RFF Working Paper Series from Resources for the Future

Abstract: Grandfathered emissions permits redistribute income to wealthy households by creating firm rents that ultimately accrue to shareholders. Consequently, they can be highly regressive, even if the poor do not have large budget shares for polluting goods. Using an analytical model, this paper estimates the burden borne by different income groups when emissions permits are used to control power plant emissions of carbon, SO2, and NOx. We also compare the burden borne by poor households under permits with that under emissions taxes, performance standards, technology mandates, and input taxes. And we show how the social costs of policies differ from efficiency costs when society has aversion to inequality.

Keywords: equity effects; pollution controls; emissions permits; social welfare function (search for similar items in EconPapers)
JEL-codes: H22 H23 Q28 (search for similar items in EconPapers)
Date: 2003-06-01
New Economics Papers: this item is included in nep-ene, nep-env and nep-pbe
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Related works:
Journal Article: Are emissions permits regressive? (2004)
Working Paper: Are Emissions Permits Regressive? (2003)
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Persistent link: https://EconPapers.repec.org/RePEc:rff:dpaper:dp-03-21

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