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Targeting Green Payments under a Budget Constraint

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  • Richard D. Horan
  • Roger Claassen

Abstract

Conventional wisdom holds that optimal abatement subsidy rates should be differentiated across firms according to the (actual or imputed) marginal damages created by a firm’s emissions. When subsidy rates are developed under a limited budget, we find they may be optimally differentiated to target, in addition to marginal damages, features such as abatement costs, income transfer, and producer participation. The degree to which subsidy rates optimally target these other features depends on how the subsidy is implemented, or more specifically, on how benchmarks for pollution abatement are defined. The results provide insight into current policy debates.

Suggested Citation

  • Richard D. Horan & Roger Claassen, 2007. "Targeting Green Payments under a Budget Constraint," Land Economics, University of Wisconsin Press, vol. 83(3), pages 319-330.
    • Handle: RePEc:uwp:landec:v:83:y:2007:i:3:p:319-330
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    References listed on IDEAS

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    Cited by:

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    4. Claassen, Roger & Duquette, Eric & Horowitz, John & Kohei, Ueda, 2014. "Additionality in U.S. Agricultural Conservation and Regulatory Offset Programs," Economic Research Report 180414, United States Department of Agriculture, Economic Research Service.
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    More about this item

    JEL classification:

    • Q24 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Land
    • Q38 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Government Policy (includes OPEC Policy)

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