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An Efficient Mechanism to Control Correlated Externalities: Redistributive Transfers and the Coexistence of Regional and Global Pollution Permit Markets

Arthur Caplan () and Emilson Silva ()

No 2002-23, Working Papers from Utah State University, Department of Economics

Abstract: We compare tradable permit markets and emission taxes as self-enforcing mechanisms to control correlated externality problems. By “correlated” we mean multiple pollutants that are jointly produced by a single source but which simultaneously cause differentiated regional and global externalities (e.g., smog and global warming). By “self-enforcing” we mean mechanisms that account for the endogeneity that exists between competing jurisdictions in the setting of environmental policy within a federation of regions. We find that joint domestic and international permit markets are Pareto efficient, while joint emissions taxes are not.

JEL-codes: C72 D62 D78 H41 H77 Q28 (search for similar items in EconPapers)
Pages: 35 pages
Date: 2002-12
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ftp://repec.bus.usu.edu/RePEc/usu/pdf/ERI2002-23.pdf First version, 2002 (application/pdf)

Related works:
Journal Article: An efficient mechanism to control correlated externalities: redistributive transfers and the coexistence of regional and global pollution permit markets (2005) Downloads
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