Journal
JOURNAL OF ENVIRONMENTAL ECONOMICS AND MANAGEMENT
Volume 70, Issue -, Pages 51-71Publisher
ACADEMIC PRESS INC ELSEVIER SCIENCE
DOI: 10.1016/j.jeem.2014.10.003
Keywords
Carbon offsets; Cap and trade; Additionality; Distributional concerns
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Funding
- National Science Foundation through the Institute of Computational Sustainability
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This paper presents an assessment of the relative efficacy of three key instruments baselines, trade ratios and limits - which are under policy discussion in the design of carbon offset programs. We rank the instruments by their implications for total emissions, economic efficiency, and efficiency gain relative to a distributional transfer from capped to uncapped sectors. We find that the baseline is the best instrument for maximizing welfare as it directly reduces the share of offsets that are non-additional and that second-best policies do not sacrifice much welfare relative to the standard first-best policy prescription. (c) 2014 Elsevier Inc. All rights reserved.
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