Taxes, Permits, and the Adoption of Abatement Technology under Imperfect Compliance

EfD Discussion Paper
1 January 2009

The authors analyze how price-based and quantity-based emissions regulations affect compliance incentives and social welfare with incomplete enforcement and technology adoption.

If the policy level is not adjusted in response to new technology, violations under tradable emissions permits (TEPs)—in contrast to taxes—decrease with the rate of technology adoption. Regarding welfare, ranking the instruments is not so straightforward: taxes may induce lower emissions damages, while TEPs induce lower costs of abatement, investment, and expected enforcement. The overall ranking depends on the extent to which these effects offset each other.



Files and links

Request a publication

Due to Copyright we cannot publish this article but you are very welcome to request a copy from the author. Please just fill in the information beneath.

Authors I want to contact
Publication | 22 October 2009