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Intensity-Based Rebating of Emission Pricing Revenues

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  • Böhringer,Christoph
  • Fischer,Carolyn
  • Rivers,Nicholas

Abstract

Carbon pricing policies worldwide are increasingly coupled with direct or indirect subsidies whereemissions pricing revenues are rebated to the regulated entities. This paper analyzes the incentives created by twonovel forms of rebating that reward additional emission intensity reductions: one given in proportion to output(intensity-based output rebating) and another that rebates a share of emission payments (intensity-based emissionrebating). These forms are contrasted with output-based rebating, abatement-based rebating, and lump sum rebating.Given the same emission price, intensity-based output rebating incentivizes the most intensity reductions, whileabatement-based rebating incentivizes the most output reductions, and output-based rebating puts the leastpressure on output (and emissions); intensity-based emissions rebating lies in between these, by implicitlysubsidizing emissions while incentivizing intensity reductions. The paper supplements partial equilibriumtheoretical analysis with numerical simulations to assess the performance of different mechanisms in a multisectorgeneral equilibrium model that accounts for economywide market interactions.

Suggested Citation

  • Böhringer,Christoph & Fischer,Carolyn & Rivers,Nicholas, 2022. "Intensity-Based Rebating of Emission Pricing Revenues," Policy Research Working Paper Series 10069, The World Bank.
    • Handle: RePEc:wbk:wbrwps:10069
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    Cited by:

    1. Aldy, Joseph E. & Burtraw, Dallas & Fischer, Carolyn & Fowlie, Meredith & Williams, Roberton C. & Cropper, Maureen L., 2022. "How is the U.S. Pricing Carbon? How Could We Price Carbon?," Journal of Benefit-Cost Analysis, Cambridge University Press, vol. 13(3), pages 310-334, October.
    2. Ferguson, Shon & Heijmans, Roweno J.R.K., 2023. "Climate Policy and Trade in Polluting Technologies," Working Paper Series 1470, Research Institute of Industrial Economics.
    3. Nikos Tsakiris & Nikolaos Vlassis, 2024. "Border Carbon Adjustments and Leakage in the Presence of Public Pollution Abatement Activities," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 87(9), pages 2231-2258, September.

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    More about this item

    JEL classification:

    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • D58 - Microeconomics - - General Equilibrium and Disequilibrium - - - Computable and Other Applied General Equilibrium Models
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy

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