MARCHÉS INTERNATIONAUX DE DROITS À POLLUER ET TAXES LOCALES SUR LES BIENS POLLUANTS

The interest of international markets for pollution rights lies in their potential to achieve a pollution reduction objective in an efficient manner. Unfortunately, the tendency of participating countries to tax polluting goods locally undermines this potential. We propose a model to examine the interest of countries participating in a market for rights to pollute in taxing the good that generates pollution. In particular, this interest depends on the initial distribution of rights among participating countries. We show how rights should be allocated to the different participating countries in order to ensure market efficiency. These optimal allocations require that a sufficiently large fraction of rights be distributed free of charge rather than auctioned.