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Tradeable Emissions Permits, Emissions Taxes and Growth

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  • Bertrand Crettez

Abstract

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.

Suggested Citation

  • Bertrand Crettez, 2004. "Tradeable Emissions Permits, Emissions Taxes and Growth," Manchester School, University of Manchester, vol. 72(4), pages 443-462, July.
    • Handle: RePEc:bla:manchs:v:72:y:2004:i:4:p:443-462
    DOI: 10.1111/j.1467-9957.2004.00402.x
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    1. Eric O'N. Fisher & Charles van Marrewijk, 1998. "Pollution and economic growth," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 7(1), pages 55-69.
    2. Pierre‐Andre Jouvet & Philippe Michel & Jean‐Pierre Vidal, 2000. "Intergenerational Altruism and the Environment," Scandinavian Journal of Economics, Wiley Blackwell, vol. 102(1), pages 135-150, March.
    3. repec:bla:scandj:v:102:y:2000:i:1:p:135-50 is not listed on IDEAS
    4. Cropper, Maureen L & Oates, Wallace E, 1992. "Environmental Economics: A Survey," Journal of Economic Literature, American Economic Association, vol. 30(2), pages 675-740, June.
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    Cited by:

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    2. Keshab Raj Bhattarai, 2007. "Capital Accumulation, Growth and Redistribution: General Equilibrium Impacts of Energy and Pollution Taxes in UK," Energy and Environmental Modeling 2007 24000005, EcoMod.

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