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The Distributional Effects of Carbon Regulation: Why Auctioned Carbon Permits are Attractive and Feasible

Peter Cramton () and Suzi Kerr ()

Papers of Peter Cramton from University of Maryland, Department of Economics - Peter Cramton

Abstract: We examine the distributional effects of carbon regulation. An auction of carbon permits is the best way to achieve carbon caps set by international negotiation to limit global climate change. An auction is preferred to grandfathering (giving polluters permits in proportion to past pollution), because it allows reduced tax distortions, provides more flexibility in distribution of costs, provides greater incentives for innovation, and reduces the need for politically contentious arguments over the allocation of rents.

Keywords: Auctions; Carbon Auctions; Pollution (search for similar items in EconPapers)
JEL-codes: D44 H23 H21 L71 (search for similar items in EconPapers)
Pages: 21 pages
Date: 1999, Revised 1998-02
New Economics Papers: this item is included in nep-agr, nep-cdm, nep-ene, nep-env and nep-pub
Note: Working Paper
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Published in Thomas Sterner, ed., The Market and the Environment, Cheltenham, United Kingdom: Edward Elgar, chapter 12, 1999.

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