The Emission Taxes Refunding Scheme Based on Output Subsidies with an Exogenous Abatement Target

ABSTRACT

This article investigates two output-based emission tax-refunding schemes with an exogenous abatement target by employing game models. For flow emissions, whether the refunding scheme could achieve the first-best outcome depended on the exogenous abatement target, and the tax-related budget constraint is binding under certain conditions. For stock emissions, the refunding scheme can only achieve the second-best outcome and the tax-related budget constraint is not binding anymore.

KEY WORDS:

• Cournot
• emission taxes
• exogenous abatement target
• output-based refunding scheme
• stock emissions

Funding

This work is supported by the Shandong Natural Science Foundation under Grant No. ZR2013GQ008, the National Natural Science Foundation of China under Grant No. 71303126 and the Shandong Soft Science Foundation under No. 2014RKB019A4. We further appreciate the weekly seminars at CEEP in CAS, where the earlier draft of the article was improved.

Additional information

Funding

This work is supported by the Shandong Natural Science Foundation under Grant No. ZR2013GQ008, the National Natural Science Foundation of China under Grant No. 71303126 and the Shandong Soft Science Foundation under No. 2014RKB019A4. We further appreciate the weekly seminars at CEEP in CAS, where the earlier draft of the article was improved.