In:
American Economic Review, American Economic Association, Vol. 104, No. 8 ( 2014-08-01), p. 2482-2508
Abstract:
When regulated firms are offered compensation to prevent them from relocating, efficiency requires that payments be distributed across firms so as to equalize marginal relocation probabilities, weighted by the damage caused by relocation. We formalize this fundamental economic logic and apply it to analyzing compensation rules proposed under the EU Emissions Trading Scheme, where emission permits are allocated free of charge to carbon-intensive and trade-exposed industries. We show that this practice results in substantial overcompensation for given carbon leakage risk. Efficient permit allocation reduces the aggregate risk of job loss by more than half without increasing aggregate compensation. (JEL H23, Q52, Q53, Q54, Q58)
Type of Medium:
Online Resource
ISSN:
0002-8282
DOI:
10.1257/aer.104.8.2482
Language:
English
Publisher:
American Economic Association
Publication Date:
2014
detail.hit.zdb_id:
203590-X
detail.hit.zdb_id:
2009979-4
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