nep-res New Economics Papers
on Resource Economics
Issue of 2008‒06‒27
two papers chosen by
Maximo Rossi
Universidad de la Republica

  1. Household Incidence of Pollution Control Policies: a Robust Welfare Analysis Using General Equilibrium Effects By Abdelkrim Araar; Yazid Dissou; Jean-Yves Duclos
  2. Optimal CO2 abatement and technological change. Should emission taxes start high in order to spur R&D? By Mads Greaker and Lise-Lotte Pade

  1. By: Abdelkrim Araar; Yazid Dissou; Jean-Yves Duclos
    Abstract: This study assesses the incidence of pollution control policies on households. In contrast to previous studies, we employ an integrated framework combining a multisector general equilibrium model with a stochastic dominance analysis using household-leved data. We consider three policy instruments in a domestic emission trading system: (i) an output-based allocation of permits (OBA); (ii) the use of the proceeds of permit sales to reduce payroll taxes (RPT); (iii) and the use of these proceeds to reduce consumption taxes instead (UCS). The general equilibrium results suggest that the return to capital is more negatively affected than the wage rate in all simulations, since polluting industries are capital intensive. Abstracting from pollution externalities, the dominance analysis allows us to conclude that all three policies have a normatively robust negative (positive) impact on welfare (poverty). Formal dominance tests indicate that RPT first-order welfare dominates OBA over all values of household incomes. UCS also first-order poverty dominates RPT for any choice of poverty line below $CAN 18,600, and poverty dominates for any poverty line (and thus welfare dominates) at the second order. Finally, while the three pollution control policies do not have a numerically large impact on inequality (in comparison to the base run), statistical tests indicate that inequality increases significantly more with OBA and RPT than with UCS.
    Keywords: Pollution control policies, household incidence, stochastic dominance, general equilibrium effects
    JEL: C68 D31 D58 D63 H23 Q52 Q56
    Date: 2008
    URL: http://d.repec.org/n?u=RePEc:lvl:lacicr:0809&r=res
  2. By: Mads Greaker and Lise-Lotte Pade (Statistics Norway)
    Abstract: Many European politicians argue that since technological development is needed to solve the climate problem, the EU should take the lead and set tougher emission targets than what is required by the Kyoto protocol. Moreover, emission trading with other countries outside EU should be limited so as to keep emission quota prices high. However, the policy of spurring R&D by setting high emission taxes today is not suggested by the literature on climate change and R&D. In this paper we investigate this result further by modeling innovation activity explicitly. In our model both the amount of R&D and the amount of CO2 abatement are decided in a decentralized way by the market as a response to an emission tax. Moreover, we introduce three distinct failures in the market for new innovations; monopolistic pricing behavior, insufficient patent protection and dynamic knowledge spillovers. Our findings suggest that governments should under some circumstances set a higher carbon tax today if we have technological change driven by R&D than if we have pure exogenous technological change. Based on numerical simulations these circumstances are i) "a standing on shoulders" type of externality in R&D or ii) weak patent protection.
    Keywords: Climate policy; technological change; emission tax
    JEL: Q28 D21 C68
    Date: 2008–06
    URL: http://d.repec.org/n?u=RePEc:ssb:dispap:548&r=res

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