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Distributional Effects of Carbon AllowanceTrading: How Government Decisions Determine Winners and Losers

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  • Dinan, Terry
  • Rogers, Diane Lim

Abstract

If the U.S. should limit CO2 emissions, an allowance trading policy may offer one method of achieving that goal in a cost-effective manner. The distributional effects of such a program could be large, far in excess of the actual cost to the economy. This paper examines how two key decisions that the government would need to make in designing a carbon trading program would determine those distributional effects. Those decisions are how to allocate the allowances and how to use the revenue that the government would receive under alternative allocation strategies. Distributional effects are estimated for both domestic and international trading programs.

Suggested Citation

  • Dinan, Terry & Rogers, Diane Lim, 2002. "Distributional Effects of Carbon AllowanceTrading: How Government Decisions Determine Winners and Losers," National Tax Journal, National Tax Association;National Tax Journal, vol. 55(2), pages 199-221, June.
    • Handle: RePEc:ntj:journl:v:55:y:2002:i:2:p:199-221
    DOI: 10.17310/ntj.2002.2.01
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    1. Ian W.H. Parry & Roberton C. Williams III & Lawrence H. Goulder, 2002. "When Can Carbon Abatement Policies Increase Welfare? The Fundamental Role of Distorted Factor Markets," Chapters, in: Lawrence H. Goulder (ed.), Environmental Policy Making in Economies with Prior Tax Distortions, chapter 25, pages 471-503, Edward Elgar Publishing.
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