TY - JOUR
T1 - Tax-versus-trading and efficient revenue recycling as issues for greenhouse gas abatement
AU - Pezzey, J.C.V.
AU - Jotzo, F.
PY - 2012/9/1
Y1 - 2012/9/1
N2 - We give empirical welfare results for global greenhouse gas emission abatement, using the first multi-party model to include both tax-versus-trading under uncertainties, and revenue recycling. Including multiple, independent parties greatly reduces the welfare advantage of an emissions tax over emissions (permit) trading in handling abatement-cost uncertainties, from that shown by existing, single-party literature. But a previously ignored and much bigger advantage of a tax, from better handling uncertainties in business-as-usual emissions, greatly boosts the overall tax-versus-trading advantage. Yet the degree to which each mechanism is used to raise and recycle revenue efficiently by lowering distortionary taxes - rather than recycle revenue as lump sums, or not raise revenue by giving tax thresholds or free permits - may in turn dominate any tax-versus-trading advantage. Choosing the best greenhouse abatement mechanism should thus consider the issues of tax-versus-trading and efficient revenue recycling together.
AB - We give empirical welfare results for global greenhouse gas emission abatement, using the first multi-party model to include both tax-versus-trading under uncertainties, and revenue recycling. Including multiple, independent parties greatly reduces the welfare advantage of an emissions tax over emissions (permit) trading in handling abatement-cost uncertainties, from that shown by existing, single-party literature. But a previously ignored and much bigger advantage of a tax, from better handling uncertainties in business-as-usual emissions, greatly boosts the overall tax-versus-trading advantage. Yet the degree to which each mechanism is used to raise and recycle revenue efficiently by lowering distortionary taxes - rather than recycle revenue as lump sums, or not raise revenue by giving tax thresholds or free permits - may in turn dominate any tax-versus-trading advantage. Choosing the best greenhouse abatement mechanism should thus consider the issues of tax-versus-trading and efficient revenue recycling together.
UR - http://www.scopus.com/inward/record.url?scp=84865186595&partnerID=8YFLogxK
UR - http://dx.doi.org/10.1016/j.jeem.2012.02.006
U2 - 10.1016/j.jeem.2012.02.006
DO - 10.1016/j.jeem.2012.02.006
M3 - Article
AN - SCOPUS:84865186595
SN - 0095-0696
VL - 64
SP - 230
EP - 236
JO - Journal of Environmental Economics and Management
JF - Journal of Environmental Economics and Management
IS - 2
ER -