C. Fischer, S. Kerr, and M. Toman, "Using Emissions Trading to Regulate US Greenhouse Gas Emissions: An Overview of Policy Design and Implementation Issues." 
National Tax Journal,  May 1998

For discussion in class Monday, January 22nd

This article is available through: Proquest, EBSCOhost, reserve desk

Instructions for using Proquest and EBSCOhost | Schaffer library electronic resources

1. What is the primary purpose of this paper?
2. What outside event is causing the US to be interested in auctions for pollution permits? What are the drawbacks of responding to that event in other ways?
3. The authors write, "Over time, GHG controls implemented by permit trading will induce investments in the development and diffusion of new technologies for reducing GHG emissions." Why would permits have that effect?
4. What do the authors mean by "upstream" and "downstream? " Explain this statement on page 455, "This corollary of the basic proposition that the ultimate incidence of a tax is independent of where it is applied is frequently misunderstood by proponents of downstream-based GHG emissions trading."
5. Describe some of the decisions that policy makers have to make about the design of a permit system. (The article goes into a lot of detail about the advantages and disadvantages of various options. You don’t need to do so. I just want you to be aware of what some of the design issues are.)
6. What is the difference between a permit auction, and a gratis allocation of permits? How would a permit auction benefit the government? What are the points in favor of a gratis allocation?
7. Why might firms want to "bank" a permit? What are the drawbacks to letting them do it? What tax issues are created when a firm banks a permit, then subsequently sells it?
8. Are the authors optimistic about the feasibility of using a permit auction system to bring about U.S. compliance with GHG emissions limits the US has agreed to? Why or why not?