Emissions Trading: ERCs or Allowances?
AbstractEmissions trading takes place from two alternative baselines: 1) emission reduction credits (ERCs) in which the baseline is existing regulations which are often activity-based; or 2) cap-and-trade which specifies the total allowable emissions. This paper examines the effects of these two tradable permit systems on marginal and average costs for the firm, using electricity generation as an example. The ERC system subsidizes the activity level to which it is tied and fails to incorporate the full cost of external harm into the product price. If the permit limit is chosen ef- ficiently, the cap-and-trade system is more effi - cient.
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Bibliographic InfoArticle provided by University of Wisconsin Press in its journal Land Economics.
Volume (Year): 77 (2001)
Issue (Month): 4 ()
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Other versions of this item:
- Q25 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Water
- Q28 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Government Policy
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