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Emission trading schemes: potential revenue effects, compliance costs and overall tax policy issues

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  • Pope, Jeff
  • Owen, Anthony D.
Abstract
The case for the imposition of carbon (emission) taxes or tradable carbon permits in important tax jurisdictions is arguably strong, based upon the polluter pays principle first proposed by Pigou almost a century ago. This paper briefly reviews the arguments for and against these market-based instruments, and discusses their relative advantages and disadvantages in a practical context. In the case of Australia, the revenue effect of the proposed tradable carbon permits scheme is estimated to be A$11.5 billion in 2010-11. For comparison, this is roughly equivalent to a quarter of the revenue from the Goods and Services Tax. The paper focuses on three neglected aspects of climate change taxation discussion to date: how much tax revenue is likely to be raised, and the administrative and compliance costs of an emissions trading scheme, with particular reference to Australia. In discussing these issues, the paper draws upon selected and relevant international experience, particularly the European Union emissions trading scheme. The challenges of an emissions trading scheme, including integration with the existing tax system, particularly in an Australian context, are also discussed. The paper concludes by emphasising the key challenges and issues facing this 'ultimate externality' debate, particularly from a taxation policy perspective.

Suggested Citation

  • Pope, Jeff & Owen, Anthony D., 2009. "Emission trading schemes: potential revenue effects, compliance costs and overall tax policy issues," Energy Policy, Elsevier, vol. 37(11), pages 4595-4603, November.
    • Handle: RePEc:eee:enepol:v:37:y:2009:i:11:p:4595-4603
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    Cited by:

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    3. Barragán-Beaud, Camila & Pizarro-Alonso, Amalia & Xylia, Maria & Syri, Sanna & Silveira, Semida, 2018. "Carbon tax or emissions trading? An analysis of economic and political feasibility of policy mechanisms for greenhouse gas emissions reduction in the Mexican power sector," Energy Policy, Elsevier, vol. 122(C), pages 287-299.
    4. Jessica Coria & Jūratė Jaraitė, 2019. "Transaction Costs of Upstream Versus Downstream Pricing of $$\hbox {CO}_{2}$$ CO 2 Emissions," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 72(4), pages 965-1001, April.
    5. Abdul-Salam, Yakubu & Kemp, Alex & Phimister, Euan, 2022. "Energy transition in the UKCS – Modelling the effects of carbon emission charges on upstream petroleum operations," Energy Economics, Elsevier, vol. 108(C).
    6. Schmidt, Johannes & Leduc, Sylvain & Dotzauer, Erik & Schmid, Erwin, 2011. "Cost-effective policy instruments for greenhouse gas emission reduction and fossil fuel substitution through bioenergy production in Austria," Energy Policy, Elsevier, vol. 39(6), pages 3261-3280, June.
    7. Liu, Guangrui & Yan, Beibei & Chen, Guanyi, 2013. "Technical review on jet fuel production," Renewable and Sustainable Energy Reviews, Elsevier, vol. 25(C), pages 59-70.
    8. Rong Wang & Juan Moreno-Cruz & Ken Caldeira, 2017. "Will the use of a carbon tax for revenue generation produce an incentive to continue carbon emissions?," Post-Print hal-03226925, HAL.
    9. Xianbing Liu & Sunhee Suk & Kinichi Sudo, 2012. "GHG emissions trading schemes in Northeast Asia: an overview and analysis of current scenarios," Chapters, in: Larry Kreiser & Ana Yábar Sterling & Pedro Herrera & Janet E. Milne & Hope Ashiabor (ed.), Carbon Pricing, Growth and the Environment, chapter 10, pages 149-166, Edward Elgar Publishing.
    10. Venmans, Frank, 2012. "A literature-based multi-criteria evaluation of the EU ETS," Renewable and Sustainable Energy Reviews, Elsevier, vol. 16(8), pages 5493-5510.
    11. Zhimin Wei & Yun Huang, 2022. "Supply Chain Coordination under Carbon Emission Tax Regulation Considering Greening Technology Investment," IJERPH, MDPI, vol. 19(15), pages 1-27, July.
    12. Coria, Jessica & Jaraite, Jurate, 2015. "Carbon Pricing: Transaction Costs of Emissions Trading vs. Carbon Taxes," Working Papers in Economics 609, University of Gothenburg, Department of Economics.
    13. Koesler, Simon & Achtnicht, Martin & Köhler, Jonathan, 2015. "Course set for a cap? A case study among ship operators on a maritime ETS," Transport Policy, Elsevier, vol. 37(C), pages 20-30.
    14. Žiga Kotnik & Maja Klun & Renata Slabe-Erker, 2020. "Identification of the Factors That Affect the Environmental Administrative Burden for Businesses," Sustainability, MDPI, vol. 12(16), pages 1-15, August.
    15. Aiwen Zhao & Xiaoqian Song & Jiajie Li & Qingchun Yuan & Yingshun Pei & Ruilin Li & Michael Hitch, 2023. "Effects of Carbon Tax on Urban Carbon Emission Reduction: Evidence in China Environmental Governance," IJERPH, MDPI, vol. 20(3), pages 1-19, January.
    16. Tae Hee Kim & Sun Hye Lee & Petros Vourvachis, 2023. "Accounting Standard-Setting for an Emission Trading Scheme: The Korean Case," Journal of Business Ethics, Springer, vol. 182(4), pages 1003-1024, February.
    17. Lin, Boqiang & Jiang, Zhujun & Zhang, Peng, 2011. "Allocation of sulphur dioxide allowance – An analysis based on a survey of power plants in Fujian province in China," Energy, Elsevier, vol. 36(5), pages 3120-3129.

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