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http://ssrn.com/abstract=263349
 
 

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Emission Taxes And The Design Of Refunding Schemes


Hans Gersbach


Swiss Federal Institute of Technology Zurich, (CER-ETH); Institute for the Study of Labor (IZA); CESifo (Center for Economic Studies and Ifo Institute); Centre for Economic Policy Research (CEPR)

Till Requate


University of Kiel - Department of Economics

August 2000

CESifo Working Paper Series No. 325

Abstract:     
We examine how emission taxes should be refunded to firms in order to create optimal incentives to invest in cleaner technologies. Since refunds cannot be made dependent on investments, an alternative way is to give back taxes to firms according to market shares. We show that universally applicable refunding schemes must be linear in market shares. Moreover, a socially optimal tax/tax refunding scheme exists if pollution is proportional to output and firms compete a la Cournot. If short-term abatement technologies exist, tax/tax refunding schemes can still provide second-best allocations. If firms are price takers, however, refunding taxes according to market shares is harmful. Since imperfect competition is a prominent phenomenon in many polluting industries, the design of socially optimal refunding schemes is an essential part of environmental regulation.

Number of Pages in PDF File: 24

JEL Classification: L5, Q2, Q28

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Date posted: April 2, 2001  

Suggested Citation

Gersbach, Hans and Requate, Till, Emission Taxes And The Design Of Refunding Schemes (August 2000). CESifo Working Paper Series No. 325. Available at SSRN: http://ssrn.com/abstract=263349

Contact Information

Hans Gersbach
Swiss Federal Institute of Technology Zurich, (CER-ETH) ( email )
Zürichbergstrasse 18
Zurich, 8092
Switzerland
+41 44 632 82 80 (Phone)
+41 44 632 18 30 (Fax)
Institute for the Study of Labor (IZA)
P.O. Box 7240
Bonn, D-53072
Germany
CESifo (Center for Economic Studies and Ifo Institute)
Poschinger Str. 5
Munich, DE-81679
Germany
Centre for Economic Policy Research (CEPR)
77 Bastwick Street
London, EC1V 3PZ
United Kingdom
Till Requate (Contact Author)
University of Kiel - Department of Economics ( email )
Olshausenstrasse 40
24098 Kiel, 24098
Germany
+49 431 880-4424 (Phone)
+49 431 880-1618 (Fax)
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