Scandinavian Working Papers in Economics
Working Papers in Economics,
University of Gothenburg, Department of Economics
No 609: Carbon Pricing: Transaction Costs of Emissions Trading vs. Carbon Taxes
Jessica Coria () and Jurate Jaraite ()
Additional contact information
Jessica Coria: Department of Economics, School of Business, Economics and Law, Göteborg University, Postal: P.O. Box 640, SE 40530 Gothenburg, Sweden
Jurate Jaraite: Centre for Environmental and Resource Economics, School of Business and Economics, Umeå University, Umeå, Sweden
Abstract: In this paper we empirically compare the transaction costs from monitoring, reporting and verification (MRV) of two environmental regulations directed to cost-efficiently reduce greenhouse gas emissions: a carbon dioxide (CO2) tax and a tradable emissions system. We do this in the case of Sweden, where a set of firms are covered by both types of regulations, i.e., the Swedish CO2 tax and the European Union’s Emissions Trading System (EU ETS). This provides us with an excellent case study as it allows us to disentangle the costs of each regulation from other firm-specific variables that might affect the overall cost of MRV procedures. Our results indicate that the MRV costs of CO2 taxation do not depend on firms’ emissions, while they do in the case of the EU ETS. For firms of equivalent emissions’ size, the MRV costs are lower for CO2 taxation than for the EU ETS, which confirms the general view that regulating emissions upstream by means of a CO2 tax yields lower transaction costs vis-á-vis downstream regulation by means of emission trading.
Keywords: Carbon dioxide emissions; Carbon tax; Emissions Trading; EU ETS; Firm-level data; Sweden
25 pages, January 2015
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