Jessica Coria (Gothenburg University) and Jurate Jaraite (CERE) provide an insightful analysis to compare the transaction costs of monitoring reporting and verification (MRV) procedures between the European Emission Trading System (EU ETS) and the carbon tax in Sweden. This paper fills the gap of the absence of such transaction costs comparison case studies.
Their results provide empirical support to the claim that transaction costs, in terms of monitoring, reporting and verification costs, are larger under emission trading system than under carbon taxation. This indicates the importance of taking into account MRV transaction costs into studies that aim to analyze/compare cost-effectiveness of emission trading and/or carbon taxes. What's more, the results show that overlapping regulations could duplicate transaction costs. These results provide useful policy implication from economic aspect.
To empirically compare the transaction costs of the EU ETS and the Swedish carbon tax, they combine primary and secondary sources of information. The primary information source comes from a survey that they conducted in 2013. The survey asked a relevant sample of Swedish firms a series of questions regarding the monitoring, reporting, and verification costs incurred as part of complying with the carbon tax and/or the EU ETS in 2012. The secondary data was collected from the Orbis database and the European Union Transaction Log database.
Carbon Pricing: Transaction Costs of Emissions Trading vs. Carbon Taxes. Coria Jessica and Jurate Jaraite. CERE working paper 2015-2