Intensity-Based Rebating of Emission Pricing Revenues
Carbon pricing policies worldwide are increasingly coupled with direct or indirect subsidies where emissions pricing revenues are rebated to the regulated entities. This paper analyzes the incentives created by two novel forms of rebating that rewa...
| Main Authors: | , , |
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| Format: | Working Paper |
| Language: | English |
| Published: |
World Bank, Washington, DC
2022
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| Subjects: | |
| Online Access: | http://documents.worldbank.org/curated/en/099146306012230610/IDU09a5d8e2808ae70458f0a57405e2997c0969c http://hdl.handle.net/10986/37498 |
| Summary: | Carbon pricing policies worldwide are
increasingly coupled with direct or indirect subsidies where
emissions pricing revenues are rebated to the regulated
entities. This paper analyzes the incentives created by two
novel forms of rebating that reward additional emission
intensity reductions: one given in proportion to output
(intensity-based output rebating) and another that rebates a
share of emission payments (intensity-based emission
rebating). These forms are contrasted with output-based
rebating, abatement-based rebating, and lump sum rebating.
Given the same emission price, intensity-based output
rebating incentivizes the most intensity reductions, while
abatement-based rebating incentivizes the most output
reductions, and output-based rebating puts the least
pressure on output (and emissions); intensity-based
emissions rebating lies in between these, by implicitly
subsidizing emissions while incentivizing intensity
reductions. The paper supplements partial equilibrium
theoretical analysis with numerical simulations to assess
the performance of different mechanisms in a multisector
general equilibrium model that accounts for economywide
market interactions. |
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