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Permit Markets, Seller Cartels and the Impact of Strategic Buyers

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Author Info

  • Odd Godal

    (University of Bergen)

  • Frode Meland

    (University of Bergen)

Abstract

The literature on emissions trading and strategic behavior under the Kyoto Protocol typically claims that a sellers' cartel featuring countries of the former Soviet Union can be quite profitable for its members. Using a Cournot-type quota exchange model, we show that this conclusion is sensitive to the assumption that large permit buyers, like the EU and Japan, are supposed to behave as price takers. Our result is driven by the same mechanisms as those found in Salant, Switzer and Reynolds (1983). We also discuss alternative models of permit exchange.

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File URL: http://www.bepress.com/cgi/viewcontent.cgi?article=2397&context=bejeap
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Bibliographic Info

Article provided by De Gruyter in its journal The B.E. Journal of Economic Analysis & Policy.

Volume (Year): 10 (2010)
Issue (Month): 1 ()
Pages: 29

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Handle: RePEc:bpj:bejeap:v:10:y:2010:i:1:n:29

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Web page: http://www.degruyter.com

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Web: http://www.degruyter.com/view/j/bejeap

Related research

Keywords: emissions trading; Kyoto Protocol; cartel formation; merger profitability;

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Cited by:
  1. Peter Cramton & Steven Stoft, 2010. "International Climate Games: From Caps to Cooperation," Papers of Peter Cramton 10icg, University of Maryland, Department of Economics - Peter Cramton, revised 2010.

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