Emissions targets and the real business cycle: Intensity targets versus caps or taxes

Carolyn Fischer and Michael Springborn

Journal of Environmental Economics and Management, 2011, vol. 62, issue 3, 352-366

Abstract: For reducing greenhouse gas emissions, intensity targets are attracting interest as a flexible mechanism that would better allow for economic growth than emissions caps. For the same expected emissions, however, the economic responses to unexpected productivity shocks differ. Using a real business cycle model, we find that a cap dampens the effects of productivity shocks in the economy on all variables except for the shadow value of the emissions constraint. An emissions tax leads to the same expected outcomes as a cap but with greater volatility. Certainty-equivalent intensity targets maintain higher levels of labor, capital, and output than other policies, with lower expected costs and no more volatility than with no policy.

Keywords: Emissions tax; Cap-and-trade; Intensity target; Business cycle (search for similar items in EconPapers)
Date: 2011
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Citations: View citations in EconPapers (173)

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Related works:
Working Paper: Emissions Targets and the Real Business Cycle: Intensity Targets versus Caps or Taxes (2011)
Working Paper: Emissions Targets and the Real Business Cycle: Intensity Targets versus Caps or Taxes (2009)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jeeman:v:62:y:2011:i:3:p:352-366

DOI: 10.1016/j.jeem.2011.04.005

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