Emissions Cap or Emissions Tax?

Yazid Dissou and Lilia Karnizova

No 332189, Conference papers from Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project

Abstract: This paper compares a cap and a tax as instruments in controlling a reduction of greenhouse gas emissions using a multi-sector dynamic stochastic general equilibrium (DSGE) model. The model incorporates two types of fossils and takes into account stochastic variations in sectoral productivity shocks. We …nd that a cap dampens the volatility in the aggregate variables, relative to a tax. However, the tax policy is preferred from the welfare perspective when shocks to the production of fossils are taken into account. These shocks signi…cantly a¤ect the production of not only fossils, but also the other economic sectors. We further …nd that a cap constraint increases the sensitivity of fossils sectors to ‡uctuations in all types of productivity shocks.

Keywords: Public Economics; Environmental Economics and Policy (search for similar items in EconPapers)
Pages: 37
Date: 2012
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://ageconsearch.umn.edu/record/332189/files/6018.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ags:pugtwp:332189

Access Statistics for this paper

More papers in Conference papers from Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project Contact information at EDIRC.
Bibliographic data for series maintained by AgEcon Search ().