Tradeable Emissions Permits, Emissions Taxes and Growth

20 Pages Posted: 22 Jul 2004

See all articles by Bertrand Crettez

Bertrand Crettez

University of Burgundy Franche-Comté - L.I.B.R.E.

Abstract

This paper uses a dynamic general equilibrium model with overlapping generations in order to analyse and to compare emissions taxes and tradeable emissions permits. Even in the context of a perfect environment, i.e. with perfect information, perfect competition..., it is shown that privately owned emissions permits have some disadvantages. An equilibrium with emissions permits would certainly be better than a equilibrium since it would entail a lower pollution level. However, it is far from clear that an economy with pollution permits would be preferable over an economy with emissions taxes. While in both cases pollution would be lower, growth would be higher in an economy with emissions taxes. This is because emissions permits divert saving from 'productive' resources and have a negative impact on capital accumulation. This happens whatever the way emissions taxes are redistributed.

Suggested Citation

Crettez, Bertrand, Tradeable Emissions Permits, Emissions Taxes and Growth. Available at SSRN: https://ssrn.com/abstract=565108

Bertrand Crettez (Contact Author)

University of Burgundy Franche-Comté - L.I.B.R.E. ( email )

avenue de l'Observatoire
F25030 Besancon
France

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