Output-based allocation and output-based rebates: a survey

Philippe Quirion

Chapter 7 in Handbook on Trade Policy and Climate Change, 2022, pp 94-107 from Edward Elgar Publishing

Abstract: Output-based refunding consists in distributing the value of taxes on pollution, or that of tradable emission allowances, to operators of emitting facilities, in proportion of their current production level. It is called output-based rebating in the case of taxes and output-based allocation in the case of tradable emission allowances. This practice is widespread, especially in climate policies, and has important economic consequences. We analyse these consequences, first in a deterministic setting and then accounting for uncertainty. While output-based refunding is detrimental to welfare in a deterministic, closed economy without prior distortions, it also provides some benefits. In particular, it is an efficient way to limit carbon leakage. Then, we present the implementation of output-based allocation in the European Union, California, China, New-Zealand and Alberta, and discuss whether it should be maintained or phased out in the coming decades.

Keywords: Business and Management; Economics and Finance; Environment; Politics and Public Policy (search for similar items in EconPapers)
Date: 2022
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Related works:
Working Paper: Output-based allocation and output-based rebates: a survey (2022)
Working Paper: Output-Based Allocation and Output-Based Rebates: A survey (2021)
Working Paper: Output-Based Allocation and Output-Based Rebates: A survey (2021)
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