Joint Design of Emission Tax and Trading Systems

Bernard Caillaud () and Gabrielle Demange

Annals of Economics and Statistics, 2017, issue 127, 163-201

Abstract: This paper analyzes the joint design of fiscal and cap-and-trade instruments in climate policies under uncertainty. Whether the optimal mechanism is a mixed policy (with some firms subject to a tax and others to a cap-and-trade) or a uniform one (with all firms subject to the same instrument) depends on parameters reflecting preferences, production, and, most importantly, the stochastic structure of the shocks affecting the economy. This framework is then used to address the issue of the non-cooperative design of climate regulation systems in various areas worldwide under uncertainty. We characterize the resulting inefficiency, show how the Pareto argument in favor of merging ETS of different regions is reinforced under uncertainty, and discuss the non-cooperative design of mixed systems.

Keywords: Climate Policies; Cap-and-Trade Mechanisms; Emission Tax; Uncertainty (search for similar items in EconPapers)
JEL-codes: D62 H23 Q54 (search for similar items in EconPapers)
Date: 2017
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Citations: View citations in EconPapers (13)

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http://www.jstor.org/stable/10.15609/annaeconstat2009.127.0163 (text/html)

Related works:
Working Paper: Joint design of emission tax and trading systems (2017)
Working Paper: Joint design of emission tax and trading systems (2017)
Working Paper: Joint Design of Emission Tax and Trading Systems (2016)
Working Paper: Joint Design of Emission Tax and Trading Systems (2016)
Working Paper: Joint Design of Emission Tax and Trading Systems (2015)
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Persistent link: https://EconPapers.repec.org/RePEc:adr:anecst:y:2017:i:127:p:163-201

DOI: 10.15609/annaeconstat2009.127.0163

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