Intensity-Based Rebating of Emission Pricing Revenues

Carbon-pricing policies worldwide are increasingly coupled with direct or indirect subsidies where emissions pricing revenues rebated to the regulated entities. This study analyzes incentives created by two novel forms of rebating that reward additional emission intensity reductions: one given in proportion output (intensity-based rebating) and another rebates a share payments rebating). These contrasted output-based rebating, abatement-based lump-sum rebating. Given same price, intensity-based incentivizes most reductions, while causes puts least pressure on (and emissions); lies between these, implicitly subsidizing incentivizing reductions. The supplements partial equilibrium theoretical analysis numerical simulations assess performance different mechanisms multisector general model accounts for economy-wide market interactions.