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GTAP Resource #6958

"Rebating revenues from a unilateral emission price"
by Böhringer, Christoph, Carolyn Fischer and Nic Rivers

We evaluate alternative options for rebating revenues from a unilateral emission
price, focusing on energy-intensive and trade-exposed industry. We show that distortionary rebating policies may be welfare-improving when there is emission leakage, when there are terms-of-trade changes associated with the introduction of an emission price, or when political or other constraints prevent the emission price being set at the optimal level. We use a numerical simulation model to compare different emission price rebating options, and find that rebating emission price revenues proportionately to output reduces emission leakage and is typically superior to other rebating options when the emission price is set close to the social cost of emissions. Rebating emission revenues proportionately to emission intensity increases emission abatement, and is typically superior when the unilateral emission price is set significantly below the social cost of emissions. We show that incorrect choice of rebating option can lead to significant welfare losses.

Resource Details (Export Citation) GTAP Keywords
Category: 2023 Conference Paper
Status: Not published
By/In: Presented during the 26th Annual Conference on Global Economic Analysis (Bordeaux, France)
Date: 2023
Created: Böhringer, C. (4/14/2023)
Updated: Böhringer, C. (4/14/2023)
Visits: 219
- Climate change policy
- GTAP Data Base and extensions
- European Union
- North America

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