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Tradeable Emissions Permits, Emissions Taxes and Growth
Author(s) -
Crettez Bertrand
Publication year - 2004
Publication title -
the manchester school
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.361
H-Index - 42
eISSN - 1467-9957
pISSN - 1463-6786
DOI - 10.1111/j.1467-9957.2004.00402.x
Subject(s) - economics , context (archaeology) , general equilibrium theory , natural resource economics , order (exchange) , capital (architecture) , pollution , competition (biology) , capital accumulation , overlapping generations model , microeconomics , economy , market economy , human capital , ecology , history , paleontology , archaeology , finance , biology
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 laissez‐faire 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.