Optimal Allocation of Tradable Pollution Rights and Market Structures
AbstractTradable environmental rights are increasingly pursed as a regulatory instrument, to control for environmental quality. However, in the presence of market power, regulation through an allocation of tradable rights generally yield inefficient outcomes. This article analyzes the effect of the initial distribution of tradable rights on the firms’ strategies and performance in abatement and production, and proposes an efficient criterion for the allocation of tradable rights among firms with market power and competitive fringe firms. The suggested criterion maximizes efficiency of the market based regulation. A simple numerical example illustrates the theoretical discussion. Copyright Springer Science+Business Media, Inc. 2005
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Bibliographic InfoArticle provided by Springer in its journal Journal of Regulatory Economics.
Volume (Year): 28 (2005)
Issue (Month): 2 (09)
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Web page: http://www.springerlink.com/link.asp?id=100298
Tradable pollution rights; allocation efficiency; environmental policy; L130; Q580; Q520;
Find related papers by JEL classification:
- L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
- Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy
- Q52 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Pollution Control Costs; Distributional Effects; Employment Effects
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