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Rebating Environmental Policy Revenues: Output-Based Allocations and Tradable Performance Standards
Open accessAbstract
Political pressure often exists to earmark environmental tax revenues or permit rents to the industry affected by the regulation. This paper analyzes schemes that rebate revenues based on output shares: tradable performance standards, an emissions tax with market-share rebates, and tradable permits with output-based allocation. All three policies effectively combine a tax on emissions with a subsidy to output. The result is a shifting of emissions control efforts toward greater emissions rate reduction and less output contraction, with higher marginal costs of control and lower output prices compared to the social optimum, given any targeted level of abatement. These welfare costs depend on the degree of output substitutability and are likely to be much larger in the long run. While some political and market-failure justifications may exist, policy makers should carefully consider industry characteristics before engaging in output-based rebating.
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“Free allowances under OB full constitute a subsidy to the production of CO2-intensive goods, so production levels are higher than under the Auction and BA scenarios.”
From Addressing leakage in the EU ETS: Border adjustment or output-based allocation? (2011) · cites this paper as Fischer, 2001
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“The innovation impact from the two methods, however, is likely ambiguous6,33.”
From Low-carbon innovation induced by emissions trading in China (2019) · cites this paper as [33]
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“Moreover, as with any allocation system whereby allowances are granted based on output, the price of the allowances will act, at the same time, as a tax on emissions and as a subsidy to output (Fischer, 2001).”
From The EU ETS and its companion policies: any insight for China's ETS? (2021) · cites this paper as Fischer, 2001
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“Consequently, to get the same aggregate emissions under OB full as under the other scenarios, lower CO2 emissions per unit produced are required, which implies a higher CO2 price (Fischer, 2001).”
From Addressing leakage in the EU ETS: Border adjustment or output-based allocation? (2011) · cites this paper as Fischer, 2001
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References 18 · Cited by 183
Research works printed but not linked: 9
- Baumol and Oates. (1988) The Theory of Environmental Policy, 2nd ed. (Cambridge University Press).
- Bovenberg, A. Lans and Ruud A. de Mooij. (1994) "Environmental Levies and Distortionary Taxation." Ameri- can Economic Review 84:1085-9.
- Bovenberg, A. Lans and F. van der Ploeg. (1994) "Environmental Policy, Public Finance and the Labor Market in a Second-Best World." Journal of Public Economics 55: 349-90.
- Bovenberg, A. Lans and Lawrence H. Goulder. (1996a) "Optimal Environmental Taxation in the Presence of Other Taxes: General Equilibrium Analyses." American Economic Review 86:985-1000.
- Bovenberg, A. Lans and Lawrence H. Goulder. (1996b) "Costs of Environmentally-Motivated Taxes in the Pres- ence of other Taxes: General Equilibrium Analyses." National Tax Journal 50: 59-88.
- Goulder, Lawrence H. (1995) "Effects of Carbon Taxes in an Economy with prior Tax Distortions: An Intertem- poral General Equilibrium Analysis." Journal of Environmental Economics and Management 29:271-97.
- Goulder, Lawrence H., Ian W.H. Parry and Dallas Burtraw. (1997) "Revenue-Raising vs. Other Approaches to Environmental Protection: The Critical Significance of Pre-Existing Tax Distortions." RAND Journal of Eco- nomics, forthcoming.
- Parry, Ian W. H. (1995) "Pollution Taxes and Revenue Recycling." Journal of Environmental Economics and Management 29:S64-77.
- Wagner, Richard E., ed. (1991) Charging for government: User charges and earmarked taxes in principle and practice. London and New York: Routledge
Metadata
- Authors
- Fischer, C., & Fischer, C.
- Venue
- Unknown
- Publisher
- Unknown
- Published
- 2001
- OpenAlex
- W2102461118
- Cited by
- 183
- References
- 18
- Citations by year
- 2025: 5 · 2024: 3 · 2023: 7 · 2022: 5 · 2021: 5 · 2020: 3 · 2019: 5 · 2018: 8 · 2017: 8 · 2016: 1 · 2015: 7 · 2014: 6 · 2013: 3 · 2012: 14
- Type
- posted content
- Language
- en
- Open access
- green
- ageconsearch.umn.edu
- Locations
- RePEc: Research Papers in Economics (submittedVersion)
- AgEcon Search (University of Minnesota, USA) (submittedVersion)
- AgEcon Search (University of Minnesota, USA)
- Topics
- Social Sciences › Economics, Econometrics and Finance › Economics and Econometrics › Climate Change Policy and Economics
- Social Sciences › Economics, Econometrics and Finance › Economics and Econometrics › Energy, Environment, Economic Growth
- Physical Sciences › Energy › Renewable Energy, Sustainability and the Environment › Energy, Environment, and Transportation Policies
- Keywords
- environmental tax revenue, output-based allocation, pollution taxes, tradable permits, earmarked revenues, emission reduction, welfare costs, political pressure, market failure
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- Fischer, C., & Fischer, C. (2001). Rebating Environmental Policy Revenues: Output-Based Allocations and Tradable Performance Standards. Unknown. https://doi.org/10.22004/ag.econ.10709
