The Fiscal Incentive of GHG Cap and Trade: Permits May Be Too Cheap and Developed Countries May Abate Too Little

Jørgen Andersen and Mads Greaker

No No 9/2014, Working Papers from Centre for Applied Macro- and Petroleum economics (CAMP), BI Norwegian Business School

Abstract: The theoretical justi cation for a greenhouse gas (GHG) cap and trade system is that participants will trade emission permits until their marginal cost of abatement equals the equilibrium price of emission permits. However, for scally constrained governments this logic does not apply, as they have a scal incentive to let welfare concerns, rather than industrial cost effciency, guide their abatement policy. Then, global cost e ciency will fail even if just a (small) subset of governments are scally constrained. Finally, we argue that any institutional change which breaks the connection between a government s abatement policy and its budget will increase welfare.

Keywords: environmental policy; fiscal icentive; fiscal constraints; GHG cap and trade; welfare (search for similar items in EconPapers)
Pages: 28 pages
Date: 2014-11
New Economics Papers: this item is included in nep-ene, nep-env and nep-reg
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://www.bi.edu/globalassets/forskning/camp/wor ... king_camp_9-2014.pdf (application/pdf)

Related works:
Working Paper: The fiscal incentive of GHG cap and trade. Permits may be too cheap and developed countries may abate too little (2014)
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:bny:wpaper:0027

Access Statistics for this paper

More papers in Working Papers from Centre for Applied Macro- and Petroleum economics (CAMP), BI Norwegian Business School Contact information at EDIRC.
Bibliographic data for series maintained by Helene Olsen ().