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Carbon pricing: transaction costs of emissions trading vs. carbon taxes
Umeå University, Faculty of Social Sciences, Center for Environmental and Resource Economics (CERE). Umeå University, Faculty of Social Sciences, Umeå School of Business and Economics (USBE).
2015 (English)Report (Other academic)
Abstract [en]

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.

Place, publisher, year, edition, pages
Umeå, 2015. , 32 p.
, CERE Working Paper Series, 2015:2
Keyword [en]
Carbon dioxide emissions, Carbon tax, Emissions Trading, EU ETS, Firm-level data, Sweden
National Category
URN: urn:nbn:se:umu:diva-104612OAI: diva2:820425
Available from: 2015-06-12 Created: 2015-06-12 Last updated: 2015-07-15Bibliographically approved

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Jaraite, Jurate
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ReferencesLink to record
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