Taxes, Permits and the Adoption of Abatement Technology under Imperfect Compliance

Clara Villegas-Palacio and Jessica Coria

No 368, Working Papers in Economics from University of Gothenburg, Department of Economics

Abstract: his paper analyzes the effects of the choice between price-based and quantity-based emission regulations on compliance incentives and social welfare in the presence of incomplete enforcement and technology adoption. We show that in contrast to taxes, the extent of violations under tradable emission permits (TEPs) decreases with the rate of technology adoption. However, in terms of welfare, the ranking of the instruments is not so straightforward: taxes induce lower emission damages while TEPs induce lower abatement, investment, and expected enforcement costs. Thereby, the overall ranking depends on the extent to which these effects offset each other.

Keywords: Technological adoption; environmental policy; imperfect compliance; enforcement; social welfare (search for similar items in EconPapers)
JEL-codes: K32 K42 L51 Q55 (search for similar items in EconPapers)
Pages: 29 pages
Date: 2009-06-16
New Economics Papers: this item is included in nep-ene, nep-env and nep-law
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Citations: View citations in EconPapers (3)

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Working Paper: Taxes, Permits, and the Adoptation of Abatement Technology under Imperfect Compliance (2009)
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