Tuesday, May 24, 2011
Blog readers may be interested in Jan Abrell's working paper, Private Transport and the European Emissions Trading System: Revenue Recycling, Public Transport Subsidies, and Congestion Effects (May 17, 2011) (available from SSRN here). From the abstract:
From 2012 onwards, the European Emission Trading System regulates the carbon emissions of electricity generation, refineries, energy intensive production, and aviation. Beside the fuel efficiency regulation of cars, there exists no European approach of carbon regulation in the private transport sectors. However, half of the income of allowance auctioning has to be used for implementing environmental improving policies including public transport subsidies. Using a Computable General Equilibrium model of the German economy, we show that exempting transport from carbon pricing but recycling revenues via public transport subsidies is welfare enhancing. By including congestion effects into the model we show that such a recycling scheme has the potential of negative gross cost of carbon regulation by reducing congestion and global pollution externalities.