Wednesday, June 1, 2011

Cap-and-trade, taxes, and distributional conflict
Enacting market-based environmental regulation, such as emissions taxes and cap-and-trade programs, often create rents that are contested by agents. In this paper, we create a framework that compares social welfare from alternative market-based environmental policy instruments under the presence of rent seeking. We show that, contrary to the commonly held view, non-revenue-raising instruments (NRRIs) are in many cases preferable over revenue-raising instruments (RRIs). We find that the choice of instrument depends on the size of a potential revenue-recycling effect and the level of preassigned rents."

by Ian A., MacKenzie a and Markus, Ohndorfb
a Center of Economic Research, ETH Zürich, Zürichbergstrasse 18, 8092 Zürich, Switzerland
Institute for Environmental Decisions, ETH Zürich, Weinbergstrasse 35, 8092 Zurich, Switzerland
Journal of Environmental Economics and Management via Elsevier Science Direct
In Press, Accepted Manuscript; Available online May 27, 2011
Keywords: Cap-and-trade; Environmental tax; Rent seeking

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