Using the allocation of emission permits for strategic trade purposes
AbstractWe show that the presence of transaction costs in emission permit markets challenges the common presumption that grandfathering permits corresponds to lump-sum transfers with no strategic effects on output. Fixed transaction-costs influence firms’ decision to participate in the permits market, while variable transaction-costs affect firms’ output choice by creating a wedge between buyers’ and sellers’ opportunity cost of using permits. Thus, permit grandfathering can be used as a strategic trade instrument even when firms are price takers in the permit markets. Grandfathered permits differ from subsidies in that the stimulus they provide is bounded exogenously and rather limited. Copyright Springer Science+Business Media New York 2014
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Bibliographic InfoArticle provided by Springer in its journal Journal of Regulatory Economics.
Volume (Year): 45 (2014)
Issue (Month): 3 (June)
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Web page: http://www.springerlink.com/link.asp?id=100298
Tradable emissions permits; Strategic trade policy; D4; F1; Q5; Q58;
Other versions of this item:
- Christos Constantatos & Lefteris Filippiadis & Eftichios S. Sartzetakis, 2011. "Using the allocation of emission permits for Strategic Trade purposes," Discussion Paper Series 2011_09, Department of Economics, University of Macedonia, revised Jun 2011.
- Q20 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - General
- Q28 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Government Policy
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