The welfare ranking of prices and quantities under noncompliance

Tutkimustuotos: ArtikkelijulkaisuArtikkeliTieteellinenvertaisarvioitu

Abstrakti

We study the welfare ranking of an emission tax and emissions trading when firms self-report their emissions to the regulator and may be noncompliant. We allow for the subjective probabilities of auditing and, using conventional assumptions, find that an emission tax produces a higher level of welfare than emissions trading under noncompliance. The main driver of the result is that the compliance pattern of the firms affects the marginal compliance cost (price of emissions) in the case of permits, thus affecting the level of emissions and welfare. The result also holds when enforcement and sanctioning costs are taken into account and differs from the result found by Montero (J Public Econ 85:435–454, 2002). We also show that the ranking may be reversed if these costs are taken into account and the regulator must audit at least one firm. We also analyze the welfare ranking when the expected penalties depend on relative violations
Alkuperäiskielienglanti
LehtiInternational Tax and Public Finance
Vuosikerta23
Numero2
Sivut269-288
Sivumäärä20
ISSN0927-5940
DOI - pysyväislinkit
TilaJulkaistu - 2016
OKM-julkaisutyyppiA1 Alkuperäisartikkeli tieteellisessä aikakauslehdessä, vertaisarvioitu

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