Emission targets and coalition options for a small, ambitious country: An analysis of welfare costs and distributional impacts for Norway

We theoretically and numerically analyse the impacts for a small, open country with carbon abatement ambitions of joining coalition allowance trading. Besides welfare both economy coalition, we scrutinise how studied policy options differ respect to their distributional across domestic income groups. Our example is EU 2030 policies Norway's linking it. In spite theoretical ambiguity, findings suggest that tighter links EU, lower costs Norway. The profile tends be progressive, i.e., relative (and absolute) incidence falls more heavily on wealthy households than poor households, regardless choice options. However, less overall cost. This indicates trade-off between efficiency distribution concerns. A national cap-and-trade system without least cost-effective option Norway but also most progressive as higher deciles face capital return wages.