Scandinavian Working Papers in Economics
Working Papers in Economics,
University of Gothenburg, Department of Economics
No 368: Taxes, Permits and the Adoption of Abatement Technology under Imperfect Compliance
Clara Villegas () and Jessica Coria ()
Additional contact information
Clara Villegas: Department of Economics, School of Business, Economics and Law, Göteborg University, Postal: Box 640, SE 40530 GÖTEBORG, And,, Facultad de Minas. Universidad Nacional de Colombia – Sede Medellín. Medellín, Colombia
Jessica Coria: Department of Economics, School of Business, Economics and Law, Göteborg University, Postal: Box 640, SE 40530 GÖTEBORG
Abstract: his paper analyzes the effects of the choice between price-based and quantity-based emission regulations on compliance incentives and social welfare in the presence of incomplete enforcement and technology adoption. We show that in contrast to taxes, the extent of violations under tradable emission permits (TEPs) decreases with the rate of technology adoption. However, in terms of welfare, the ranking of the instruments is not so straightforward: taxes induce lower emission damages while TEPs induce lower abatement, investment, and expected enforcement costs. Thereby, the overall ranking depends on the extent to which these effects offset each other.
Keywords: Technological adoption; environmental policy; imperfect compliance; enforcement; social welfare
29 pages, June 16, 2009
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