Taxes and Tradable Permits As Instruments for Controlling Pollution: Theory and Practice

January 1, 2000

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John Norregaard, and Valerie Reppelin. Taxes and Tradable Permits As Instruments for Controlling Pollution: Theory and Practice, (USA: International Monetary Fund, 2000) accessed November 15, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

This paper examines the relative merits of two dominant economic instruments for reducing pollution—”green” taxes and tradable permits. Theoretically, the two instruments share many similarities, and on balance, neither seems preferable to the other. In practice, however, most countries have relied more on taxes than on permits to control pollution. The analysis suggests a number of lessons to be learned from country experiences regarding the design and implementation of both instruments. While many, particularly European countries, currently have long-term programs involving environmental taxes, a willingness to experiment with tradable permits seems to be growing, especially given the Kyoto protocol emission targets.

Subject: Emissions trading, Environment, Environmental policy, Environmental taxes, Greenhouse gas emissions, Taxes

Keywords: Carbon tax, Emission tax, Emissions trading, Environmental policy, Environmental taxes, Global, Green tax reform, Greenhouse gas emissions, Innovating firm, Market structure, Permits market, Permits system, Tradable permits, WP

Publication Details

Pages:

49
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2000/013
Stock No:

WPIEA0132000
ISBN:

9781451842999
ISSN:

1018-5941

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