2000年-世界发展银行全球_Environmental_Policy_and_Time_Consistency___Emissions_Taxes_and_Emissions_Trading_48页_1mb

Environmental Policy and Time Consistency: Emissions Taxes and Emissions Trading

Core Content

This paper compares the effectiveness of emissions taxes and emissions trading as market-based instruments for controlling pollution and promoting the adoption of cleaner technologies. It focuses on the time consistency of these policies and how they influence the incentives for firms to adopt new technologies.

Main Points

• Emissions Taxes and Emissions Trading are both market-based instruments that provide firms with incentives to reduce emissions by adopting cleaner technologies.
• Command-and-control standards only create incentives for cleaner technologies up to the point where the standards are no longer binding, after which the shadow price of emissions falls to zero.
• Time consistency is a key issue in the implementation of these policies. Regulators may not be able to commit to a policy that leads to efficiency in the long term, as their decisions may be inconsistent with future expectations.
• The incentive structure of these instruments depends on the nature of environmental damage (linear vs. strictly convex) and the number of regulated firms.

Key Findings

1. Linear Damage

• Efficiency in technology adoption involves either universal adoption of the new technology or universal retention of the old technology, depending on the cost of adoption.
• First-best tax policy and first-best permit-supply policy are both time-consistent under linear damage conditions.
• Emissions taxes do not require continual adjustment in response to technological change when damage is linear, which may give them an advantage over emissions trading.

2. Strictly Convex Damage

• Efficiency may require partial adoption of the new technology.
• The first-best tax policy is not time-consistent and the tax rate must be adjusted after adoption has taken place (ratcheting).
  • Ratcheting can induce an efficient equilibrium if there is a large number of firms.
  • However, if there are few firms, ratcheting creates too many incentives for adoption.
• The first-best supply policy is time-consistent only if there is a large number of firms.
  • If there are few firms, the supply of permits must be ratcheted, which may undermine incentives for technology adoption.

3. Comparison of Instruments

• The incentive to adopt technology should be the same for both emission taxes and tradable permits in principle.
• However, time consistency issues affect the implementation of these policies, especially in the case of strictly convex damage and few firms.
• Emissions taxes may have a slight advantage over emissions trading in some cases, particularly when damage is linear and continual adjustment is not needed.

Implications

• Regulators must consider time consistency when designing policies to ensure that the chosen instrument leads to efficient technology adoption.
• For emissions trading, continual adjustment of permit supply is necessary to maintain efficiency, even under linear damage.
• The paper contributes to the broader literature on incentives for technological change under environmental regulation, highlighting the importance of analyzing these incentives in equilibrium.

Conclusion

• Emissions taxes and emissions trading are both effective in promoting cleaner technologies, but their time consistency properties differ.
• Emissions taxes may be more advantageous in certain contexts, particularly when damage is linear and there is no need for continual adjustment.
• The choice of instrument should be based on the structure of the pollution market and the nature of environmental damage.

References

• Kennedy, Peter W. and Benoit Laplante. 2000. Environmental Policy and Time Consistency: Emissions Taxes and Emissions Trading. World Bank Policy Research Working Paper No. 2351.
• Downing, D. B. and L. White. 1986. The Incentive Effects of Emissions Taxes.
• Malueg, D. 1989. Emissions Trading and the Incentive for Technological Change.
• Milliman, S. and R. Prince. 1989. Environmental Policy and the Choice of Technology.
• Biglaiser, K., L. Horowitz and J. Quiggin. 1995. Time Consistency and the Design of Environmental Policy.
• Laffont, J.-J. and J. Tirole. 1996a and 1996b. Environmental Regulation and Incentives for Innovation.
• Jung, T., J. Krutilla and S. Boyd. 1996. Emissions Taxes and Emissions Trading: A Comparative Analysis.
• OECD. 1999. Environmental Policy and the Economics of Technology Choice.