Refunding Emission Payments: Output-Based Versus Expenditure-Based Refunding
Cathrine Hagem (),
Michael Hoel and
Additional contact information
Cathrine Hagem: Statistics Norway
Michael Hoel: University of Oslo
Environmental & Resource Economics, 2020, vol. 77, issue 3, No 7, 667 pages
Abstract We analyse two mechanism designs for refunding emission payments to polluting firms: output-based refunding (OBR) and expenditure-based refunding (EBR). In both instruments, emission fees are returned to the polluting industry, typically making the policy more politically acceptable than a standard tax. The crucial difference between OBR and EBR is that the fees are refunded in proportion to output in the former but in proportion to the firms’ expenditure on abatement technology equipment in the latter. To achieve the same abatement target as a standard tax, the fee level in the OBR design is higher, whereas the fee level in the EBR design is lower. The use of OBR and EBR may lead to large differences in the distribution of output and costs across firms. Both designs imply a cost-ineffective provision of abatement, as firms put relatively too much effort into reducing emissions through abatement technology compared with reducing output. However, a standard tax may be politically infeasible and maintaining output may be seen as a political advantage by policymakers if they seek to avoid activity reduction in the regulated sector.
Keywords: Refunded charge; Output-based; Expenditure-based; NOx; Tax subsidy; Policy design (search for similar items in EconPapers)
JEL-codes: H23 Q25 Q28 (search for similar items in EconPapers)
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1) Track citations by RSS feed
Downloads: (external link)
http://link.springer.com/10.1007/s10640-020-00513-1 Abstract (text/html)
Access to the full text of the articles in this series is restricted.
Working Paper: Refunding Emission Payments: Output-Based versus Expenditure-Based Refunding (2020)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:kap:enreec:v:77:y:2020:i:3:d:10.1007_s10640-020-00513-1
Ordering information: This journal article can be ordered from
http://www.springer. ... al/journal/10640/PS2
Access Statistics for this article
Environmental & Resource Economics is currently edited by Ian J. Bateman
More articles in Environmental & Resource Economics from Springer, European Association of Environmental and Resource Economists Contact information at EDIRC.
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().