This paper presents an analytical and numerical comparison of the welfare impacts of alternative instruments for environmental protection in the presence of endogenous technological innovation. We analyze emissions taxes and both auctioned and free (grandfathered) emissions permits. We find that...

We assess different policies for reducing carbon dioxide (CO2) emissions and promoting the innovation and diffusion of CO2-reducing power technologies: (1) emissions price, (2) tax on fossil power, (3) tradable emissions performance standard, (4) market share requirement for renewables, (5)...

Environmental policies with output-based refunding of the revenues effectively combine a tax on emissions with a subsidy to output. Three similar forms exist: tradable performance standards, an emissions tax with rebates, and tradable permits with output-based allocation. Two arguments for...

Rate-based emissions policies (like tradable performance standards) fix average emissions intensity, while cap-and-trade policies fix total emissions. This paper shows that unfettered trade between rate-based and cap-and-trade programs always raises combined emissions, except when product...

Political pressure often exists to earmark environmental tax revenues or permit rents to the industry affected by the regulation. This paper analyzes schemes that rebate revenues based on output shares: tradable performance standards, an emissions tax with market-share rebates, and tradable...

The choice of mechanism for allocating tradable emissions permits has important efficiency and distributional effects when tax and trade distortions are considered. We present different rules for allocating carbon allowances within sectors (lump-sum grandfathering, output-based allocation [OBA],...

In a second-best world of below-optimal pollution pricing, the public return to R&D may be greater than under Pigouvian pricing, due to excess benefits of increasing abatement, or it may be lower, since private actors lack the incentives to take full advantage of the new, cleaner technologies....

This paper develops analytical models to estimate the welfare effects of higher Corporate Average Fuel Economy (CAFE) standards on new passenger vehicles. The analysis incorporates a broad range of fuel-and-driving-related externalities, fuel taxes, different assumptions concerning consumers'...

Estimates of marginal abatement costs for reducing carbon emissions in the United States by the major economic-energy models vary by a factor of five, undermining support for mandatory policies to reduce greenhouse gas emissions. We use meta analysis to explain these cost differences, holding...

Project-based mechanisms for emissions reductions credits, like the Clean Development Mechanism, pose important challenges for policy design because of several inherent characteristics. Participation is voluntary. Evaluating reductions requires assigning a baseline for a counterfactual that...