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GTAP Resource #7168

"Economy-wide impacts of output-based permit allocations in emissions trading schemes"
by Winchester, Niven

Emissions trading schemes (ETSs) in many jurisdictions offer a free output-based allocation (OBA) of emissions permits to selected energy-intensive sectors to reduce the burden of emissions pricing. Most analyses of the impact of OBAs relative to grandfathering or auctioning permits focuses on the US economy. This paper examines the economy-wide impacts of OBAs using a stylized model that is calibrated economies with different relative sizes of energy-intensive sectors while other factors are held constant. The results show that OBAs lead to larger increases in carbon prices and welfare costs from reducing emissions (1) the larger the relative size of sectors that receive OBAs, (2) the tighter the emissions cap. We also find that some emissions reduction targets are infeasible when the size of sectors that receive OBAs is sufficiently large. Jurisdictions considering OBAs should carefully consider the economy-wide impacts of this allocation method before enacting policies.

Resource Details (Export Citation) GTAP Keywords
Category: 2024 Conference Paper
Status: Not published
By/In: Presented during the 27th Annual Conference on Global Economic Analysis (Fort Collins, Colorado, USA)
Date: 2024
Created: Winchester, N. (4/9/2024)
Updated: Winchester, N. (5/7/2024)
Visits: 66
- Climate change policy

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