کنترل انتشار گاز CO2 کارآمد با مالیات انتشار و انتشار تجارت بین المللی

We consider a stylized model of the hybrid CO2CO2 emissions control in the EU. A group of countries operates a joint emissions trading system (ETS) covering only part of each country's economy. The countries levy an emissions tax in the rest of their economy and, possibly, an additional tax in their ETS sectors. Welfare-maximizing governments are shown to lack incentives for group-efficient policies. Preexisting taxes overlapping with the ETS lead policy makers to allocate more permits to their ETS sectors than cost effectiveness would suggest. The cases of ‘small’ and ‘large’ countries exhibit significantly different efficiency implications.

In the Kyoto Protocol, the European Union (EU) has committed itself to reduce greenhouse gas emissions by 8% by 2012 from the base year of 1990. To share the burden, the member states agreed upon national emissions (reduction) targets or ‘caps’ ( EU, 1999). Moreover, the innovative instrument of an EU-wide CO2CO2-emissions trading system (ETS) was introduced in 2005 ( EU, 2003a). The ETS is confined to CO2CO2 emissions of emission-intensive installations, the most important of these being combustion installations, mineral installations, and pulp and paper production. The ETS does not cover major energy consumers like households and the transportation sector. The Emissions Trading Directive (EU, 2003a) stipulates, among other things, that all national governments must submit an allocation plan fixing the split of their national emissions cap into two sectoral caps, one for the sector covered by the ETS (ETS sector) and one for the rest of the economy (non-ETS sector). Governments also have to specify their national strategies to enforce the cap in their non-ETS sectors. Among the member states’ national policy instruments there are taxes on various energy products that come close to CO2CO2 emissions taxes. Such taxes are levied not only in non-ETS sectors but also in ETS sectors, in the latter often at lower rates, though. For example, Austria, Germany,1 Ireland and Poland levy taxes on heavy fuel oil for electricity generation; various countries also tax coal and light fuel that is used in both sectors (International Energy Agency, 2007).2 As a result, the EU approach to the reduction of CO2CO2 emissions consists of a hybrid mix of policy instruments that are partly complementary and partly overlapping. The present paper focuses on the aforementioned hybrid EU policy and aims at exploring the (dis)incentives of welfare-maximizing national governments to implement the group-efficient policy mix, • when they have the discretion to fix the sectoral split of their national emissions cap and are free to choose the rate of emissions taxes overlapping with the ETS; • when they face preexisting emissions taxes overlapping with the ETS; • and when they do or do not take account of the impact of their own policies on the international permit price. To capture the EU scenario in a stylized way, we consider a group of countries. The emissions of these countries are constrained by predetermined national emissions caps and the countries operate a joint ETS with mandatory participation of each country's ETS sector. Hence the national emissions caps need to be split into a cap for the ETS sector (permit cap) and a cap for the non-ETS sector.3 In the non-ETS sector, emissions are assumed to be properly capped through a domestic sectoral emissions tax. In addition, we consider another emissions tax in ETS sectors overlapping with the ETS that may be imposed either by a supranational agency on all countries at a uniform rate (which is not the case in the EU) or by the countries’ governments (as in the EU). The latter tax may be either freely chosen or it may preexist and is inert.4 Regarding the efficiency properties of policies, it will turn out to be important whether the competence for fixing permit caps and rates of overlapping emissions taxes lies with some central agency (e.g. with an EU agency) or with national governments. In the EU, emissions taxes in ETS sectors are the national governments’ sole responsibility.5 However, the competence for determining national permit caps is not so clear. According to the ETS Directive (EU, 2003a) each government has to stipulate its permit cap in its allocation plan, however, it has to submit that plan to the European Commission prior to implementation to verify its compliance with certain criteria. Thus, although the commission exerts some influence, governments appear to retain considerable discretion in fixing their caps. We take account of both ways of placing the competence for fixing permit caps and add to these options the possibility of preexisting overlapping taxes. That gives rise to a set of six scenarios as shown in Table 1. The first column of Table 1 is not empirically relevant but is useful as a benchmark. Our emphasis will mainly be on the second row of Table 1.Focusing on competitive economies and welfare-maximizing governments, we first characterize the emissions control that is efficient for the group of countries and then decentralize the efficient allocation by prices and tax rates (scenario A in Table 1). Next we explore the efficiency implications of emissions control in the case of decentralized policy making (second row of Table 1). Welfare and efficiency implications will turn out to depend on whether countries are assumed to be ‘small’ or ‘large’. Beginning with the small-country case, we first consider governments that are free to use overlapping taxes or abolish existing ones (scenario E in Table 1). We show that such governments do not want to levy overlapping taxes and thus group efficiency is achieved. When a preexisting and inert overlapping tax (scenario F in Table 1) is in force, the second-best strategy for governments6 is to choose a larger than cost-effective permit cap. Interestingly, the literature assessing the allocation plans for the first trading period of the EU ETS (e.g. Klepper and Peterson, 2004 and Böhringer et al., 2006) almost unanimously suggests that permits have been allocated too generously to the ETS sector and hence inefficiently. It has been conjectured that this bias is possibly due to superior lobbying power of the energy-intensive industry. In contrast, our result of ‘generous’ permit caps is caused by rational welfare-maximizing governments of small countries. The second part of the paper addresses the large-country case. The governments of large countries are aware that their policy affects the price in the international permit market, inducing them to manipulate the terms of trade with respect to permits in their favor while behaving Nash with regard to the other countries’ policies. In the case of scenario B (Table 1) governments are shown to use overlapping taxes or subsidies as a surrogate for an (unavailable) policy of optimal tariffs similar to Markusen (1975) and Ulph (1997). If there are no overlapping taxes, e.g., because a central agency used its authority to prohibit them (scenario D), governments still have incentives to distort the group-efficient competitive equilibrium. We also identify the fiscal externalities prevailing in equilibrium. While isolated environmental policy instruments are analyzed in a vast number of theoretical and empirical studies, policy interactions appear to be under-researched (Sorrell and Sijm, 2003). This certainly applies to the crowded policy space in the EU countries that became even more complex after the ETS was launched. Among the few studies directly related to the interaction of an ETS with other policy instruments are Sijm (2005) and Böhringer et al. (2008). Without offering a formal analysis, Sijm (2005, p. 83) suggests that “…… from the perspective of CO2CO2 efficiency, the coexistence of EU ETS and policies affecting fossil fuel use by participating sectors is hard to justify and, hence, these policies could be considered to be redundant and ready to be abolished”. Similarly, in a non-technical report on subsidizing renewable energy, the Scientific Council to the German Federal Ministry for the Economy (2004) recommended phasing out subsidies because, in combination with the EU ETS, the emissions reductions achieved by such subsidies are regarded as excessively costly without improving the ecological effectiveness of the ETS. Böhringer et al. (2008) employ a CGE model with ETS and sectoral emissions taxes and find that if a country unilaterally raises the rate of its overlapping tax, that country's costs increase and so do the EU's overall costs of implementing the overall EU emissions target. Our focus on an international ETS also relates our analysis to the issue of trade and environment as surveyed, e.g., by Ulph (1997). However, that literature typically considers countries applying a single pollution control instrument to their domestic and exposed sectors. Hoel (1996) shows that differential treatment of these sectors may be warranted, if transboundary pollution occurs and if trade policy is infeasible. Rauscher (1994) suggests that for large countries it may be optimal to deviate from efficient pollution control to improve the terms of trade. Our paper is organized as follows. Section 2 sets up the model and characterizes the efficient allocation and the first-best policy-supported competitive equilibrium for the group of countries. Section 3 explores the small-country case of governments which determine their permit caps when they are either free to choose an overlapping tax or face a preexisting overlapping tax. Section 4 deals with the same issues but with governments which account for the impact of their policies on the terms of trade with respect to permits. Section 4 also explores the incentives of governments of large countries to pursue group-efficient policies. Section 5 concludes.