New Economics Papers
on Resource Economics
Issue of 2012‒01‒10
two papers chosen by

  1. Environmental Protection, Public Finance Requirements and the Timing of Emission Reductions By Elettra Agliardi; Luigi Sereno
  2. The Competitiveness Impacts of Climate Change Mitigation Policies By Joseph E. Aldy; William A. Pizer

  1. By: Elettra Agliardi (Department of Economics, University of Bologna and Rimini Center for Economic Analysis); Luigi Sereno (Department of Economics, University of Bologna)
    Abstract: The effects of four environmental policy options for the reduction of pollution emissions, i.e. taxes, emission standards, auctioned permits and freely allocated permits, are analyzed. The setup is a real option model where the amount of emissions is determined by solving the firm's profit maximization problem under each policy instrument. The regulator solves an optimal stopping problem in order to find the critical threshold for policy adoptions taking into account revenues from taxes and auctioned permits and government spending. In this framework, we find the ranking of the alternative policy options in terms of their adoption lag and social welfare. We show that when the output demand is elastic emission standards are preferred to freely allocated permits. Taxes and auctioned permits are always equivalent in terms of their adoption lag and social welfare and also equivalent to emission standards when the regulator redistributes revenues.
    Keywords: Environmental policies; Taxes; Emission standards; Permits; Public abatement spending; Optimal implementation time; Real options
    JEL: Q28 Q L51 H23
    Date: 2011–12
  2. By: Joseph E. Aldy; William A. Pizer
    Abstract: In order to clarify ongoing debates over the competitiveness impacts of climate change regulation, we develop a precise definition that can be estimated with available domestic production, trade, and energy price data. We use this definition and a 20+ year panel of 400+ U.S. manufacturing industries to estimate and predict the effects a U.S.-only $15 per ton CO2 price. We find competitiveness effects on the order of a 1.0 to 1.3 percent decline in production among energy-intensive manufacturing industries, representing about one-third of the policy’s impacts on these firms’ output.
    JEL: F18 Q52 Q54
    Date: 2011–12

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