Permit markets, market power, and the trade-off between efficiency and revenue raising
AbstractThis paper focuses on an emissions permit market dominated by one firm and with a government concerned about social efficiency and permits revenue. In this setting, it is shown that the dominant firm's market power reduces the opportunities for the government to raise non-distortionary revenue from permits without loss of consumer surplus. Since the government's objectives are thus hampered in auctioning permits, the dominant firm should be excluded from the auction. Specifically, the regulator should sell permits directly, through bilateral negotiation, to the dominant firm, and auction off the remaining permits to the fringe firms.
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Bibliographic InfoArticle provided by Elsevier in its journal Resource and Energy Economics.
Volume (Year): 31 (2009)
Issue (Month): 4 (November)
Contact details of provider:
Web page: http://www.elsevier.com/locate/inca/505569
Emissions permit markets Dominant firm Efficiency-revenue dilemma Bargaining;
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