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The Emergence of Market Power in Emission Rights Markets: The Role of Initial Permit Distribution

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  • Maeda, Akira
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    Abstract

    This paper offers an analytical model of emission permit markets in which a large number of regulated emitters participate, and derives formulae that estimate the degree of market distortion. These formulae clearly show the entire dependence of the ratio of market prices to competitive levels on the permit initial distribution as well as the existence of a threshold for effective market power. While the findings challenge a well-known conception of the Coase Theorem, they have significant policy implications vis-a-vis the Kyoto Protocol and the related policy debates on excess emission rights known as "hot air." Copyright 2003 by Kluwer Academic Publishers

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    Bibliographic Info

    Article provided by Springer in its journal Journal of Regulatory Economics.

    Volume (Year): 24 (2003)
    Issue (Month): 3 (November)
    Pages: 293-314

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    Handle: RePEc:kap:regeco:v:24:y:2003:i:3:p:293-314

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    Web page: http://www.springerlink.com/link.asp?id=100298

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    Cited by:
    1. Akira Maeda, 2012. "Setting trigger price in emissions permit markets equipped with a safety valve mechanism," Journal of Regulatory Economics, Springer, vol. 41(3), pages 358-379, June.
    2. Jehiel, Philippe & Moldovanu, Benny, 2005. "Allocative and Informational Externalities in Auctions and Related Mechanisms," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 142, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
    3. Christoph Böhringer & Bouwe Dijkstra & Knut Einar Rosendahl, 2011. "Sectoral and regional expansion of emissions trading," Discussion Papers 654, Research Department of Statistics Norway.
    4. Chevallier, Julien, 2007. "A differential game of intertemporal emissions trading with market power," Economics Papers from University Paris Dauphine 123456789/4228, Paris Dauphine University.
    5. Stefan Weishaar, 2007. "CO 2 emission allowance allocation mechanisms, allocative efficiency and the environment: a static and dynamic perspective," European Journal of Law and Economics, Springer, vol. 24(1), pages 29-70, August.
    6. Franz Wirl & Juergen Noll, 2008. "Abatement and Permits when Pollution is Uncertain and Violations are Fined," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 40(2), pages 299-312, June.
    7. Bouwe Dijkstra & Edward Manderson & Tae-Yeoun Lee, 2011. "Extending the Sectoral Coverage of an International Emission Trading Scheme," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 50(2), pages 243-266, October.
    8. Chung, Sung H. & Weaver, Robert D. & Friesz, Terry L., 2012. "Oligopolies in pollution permit markets: A dynamic game approach," International Journal of Production Economics, Elsevier, vol. 140(1), pages 48-56.
    9. repec:old:wpaper:337-11 is not listed on IDEAS
    10. Chevallier, Julien, 2008. "Strategic manipulation on Emissions Trading Banking Program with fixed horizon," Economics Papers from University Paris Dauphine 123456789/4213, Paris Dauphine University.
    11. Böhringer, Christoph & Rosendahl, Knut Einar, 2009. "Strategic partitioning of emission allowances under the EU Emission Trading Scheme," Resource and Energy Economics, Elsevier, vol. 31(3), pages 182-197, August.
    12. Beat Hintermann, 2011. "Market Power, Permit Allocation and Efficiency in Emission Permit Markets," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 49(3), pages 327-349, July.
    13. Bouwe R. Dijkstra & Edward Manderson & Tae-Yeoun Lee, . "Partial International Emission Trading," Discussion Papers 08/27, University of Nottingham, GEP.
    14. Julien Bueb & Sonia Schwartz, 2011. "Strategic manipulation of a pollution permit market and international trade," Journal of Regulatory Economics, Springer, vol. 39(3), pages 313-331, June.

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