## Taxes and Tradable Permits As Instruments for Controlling Pollution: Theory and Practice

_IMF Working Papers, January 1, 2000_

## Source details

**Canonical URL:** [Taxes and Tradable Permits As Instruments for Controlling Pollution: Theory and Practice](https://www.imf.org/en/publications/wp/issues/2016/12/30/taxes-and-tradable-permits-as-instruments-for-controlling-pollution-theory-and-practice-3411)

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## Bibliographic details
- Authors: John Norregaard, Valerie Reppelin
- Published: January 1, 2000
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781451842999.001

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### Summary
- This paper examines the relative merits of two dominant economic instruments for reducing pollution—”green” taxes and tradable permits.
- Theoretically, the two instruments share many similarities, and on balance, neither seems preferable to the other.
- In practice, most countries have relied more on taxes than on permits to control pollution.
- The analysis suggests a number of lessons to be learned from country experiences regarding the design and implementation of both instruments.
- While many, particularly European countries, currently have long-term programs involving environmental taxes, a willingness to experiment with tradable permits seems to be growing, especially given the Kyoto protocol emission targets.

### Key findings and themes
- Comparable theoretical effectiveness:
  - Green taxes and tradable permits share many similarities in theory.
  - On balance, neither instrument appears to be theoretically preferable to the other.
- Practical divergence:
  - Most countries have relied more on taxes than on permits in practice.
- Evolving policy interest:
  - Growing willingness to experiment with tradable permits, motivated in part by the Kyoto protocol emission targets.
- Lessons from country experience:
  - The analysis identifies a number of lessons regarding the design and implementation of both instruments (specific lessons are discussed in the paper).

### Subjects and keywords
- Subject: Emissions trading, Environment, Environmental policy, Environmental taxes, Greenhouse gas emissions, Taxes
- Keywords: carbon tax, emission tax, Emissions trading, Environmental policy, Environmental taxes, Global, green tax reform, Greenhouse gas emissions, innovating firm, market structure, permits market, permits system, tradable permits, WP

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## Content in this bundle

- **Taxes and Tradable Permits as Instruments for Controlling Pollution:  Theory and Practice - WP/00/13**
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_Source: https://www.imf.org/en/publications/wp/issues/2016/12/30/taxes-and-tradable-permits-as-instruments-for-controlling-pollution-theory-and-practice-3411_