Carbon Trading in the Policy Mix

The Kyoto Protocol is stimulating the development of emissions-trading schemes at the national and international levels. These are being introduced alongside existing policy instruments such as carbon taxes and negotiated agreements, leading to complex problems of policy interaction. But the topic o...

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Bibliographic Details
Published in:Oxford review of economic policy 2003-10, Vol.19 (3), p.420-437
Main Authors: SORRELL, STEVEN, SIJM, JOS
Format: Article
Language:English
Subjects:
Carbon
Carbon dioxide emissions
Climate change
Climate change policy
Climate policy
Costs
Economic policy
Economics
Electricity
Electricity generation
Emission allowances
Emissions policy
Emissions trading
Energy efficiency
Energy industry
Environmental economics
Environmental policy
Environmental regulations
Generators
Global warming
Greenhouse effect
International
Kyoto Protocol
Objectives
Policy studies
Pollutant emissions
Renewable energy policy
Stockholders
Studies
Suppliers
Treaties
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Summary:The Kyoto Protocol is stimulating the development of emissions-trading schemes at the national and international levels. These are being introduced alongside existing policy instruments such as carbon taxes and negotiated agreements, leading to complex problems of policy interaction. But the topic of policy interaction remains under-researched. This paper aims to improve understanding of such interactions by examining the conditions under which a cap-and-trade scheme for carbon-dioxide emissions may usefully coexist with carbon/energy taxes, support mechanisms for renewable electricity, and policies to promote energy efficiency. The paper argues that each of these instrument combinations may be acceptable, provided they contribute to either improving the static or dynamic efficiency of the trading scheme, or delivering other valued policy objectives. But, since the coexisting instruments may raise overall abatement costs while contributing nothing further to emission reductions, the objectives and trade-offs within the policy mix must be explicit.
ISSN:0266-903X
1460-2121
1460-2121
DOI:10.1093/oxrep/19.3.420