Emissions Taxes Versus Intensity Standards: Second-Best Environmental Policies with Incomplete Regulation.

UNCG Author/Contributor (non-UNCG co-authors, if there are any, appear on document)
Stephen P. Holland, Associate Professor (Creator)
The University of North Carolina at Greensboro (UNCG )
Web Site: http://library.uncg.edu/

Abstract: The best emissions tax or emissions cap may be an inferior instrument under incomplete regulation (leakage). Without leakage, an intensity standard (regulating emissions per unit of output) is inferior due to an implicit output subsidy. This inefficiency can be eliminated by an additional consumption tax. With leakage, an intensity standard can dominate the optimal emissions tax, since the implicit output subsidy prevents leakage. The addition of a consumption tax improves an intensity standard's efficiency, may prevent leakage, and may be efficient. Comparing intensity standards to output-based updating shows that the latter dominates if updating is sufficiently flexible.

Additional Information

Language: English
Date: 2012
intensity standards, externality, emissions trading, emissions taxes, leakage, incomplete regulation, market power

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