Are Emissions Permits Regressive?

Grandfathered emissions permits redistribute income to wealthy households by creating firm rents that ultimately accrue to shareholders. Consequently, they can be highly regressive, even if the poor do not have large budget shares for polluting goods. Using an analytical model, this paper estimates the burden borne by different income groups when emissions permits are used to control power plant emissions of carbon, SO2, and NOx. We also compare the burden borne by poor households under permits with that under emissions taxes, performance standards, technology mandates, and input taxes. And we show how the social costs of policies differ from efficiency costs when society has aversion to inequality.


Issue Date:
2003
Publication Type:
Working or Discussion Paper
PURL Identifier:
http://purl.umn.edu/10523
Total Pages:
38
JEL Codes:
Q28; H22; H23
Series Statement:
Discussion Paper 03-21




 Record created 2017-04-01, last modified 2017-08-23

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