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What have we learned from emissions trading experiments?

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  • R. Andrew Muller

    (Department of Economics, McMaster University, Hamilton, Ontario, Canada)

  • Stuart Mestelman

    (Department of Economics, McMaster University, Hamilton, Ontario, Canada)

Abstract

Emissions trading is a form of environmental regulation in which a regulatory body specifies the total allowable discharge of pollutants, divides this cap into individual permits assigned to individual polluters, and allows trading of the resulting permits. Laboratory experiments, in which paid subjects participate in controlled markets, can be used to test both proposals for emission trading and the theories on which they are based. This paper surveys the laboratory research that has investigated the efficiency of emission trading programs, the role of alternative instruments and institutions, the effects of allowing firms to carry inventories of permits, and the extent to which market power can be exercised. © 1998 John Wiley & Sons, Ltd.

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Bibliographic Info

Article provided by John Wiley & Sons, Ltd. in its journal Managerial and Decision Economics.

Volume (Year): 19 (1998)
Issue (Month): 4-5 ()
Pages: 225-238

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Handle: RePEc:wly:mgtdec:v:19:y:1998:i:4-5:p:225-238

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Web page: http://www3.interscience.wiley.com/cgi-bin/jhome/7976

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References

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  1. R. Andrew Muller & Stuart Mestelman, 1994. "Emission Trading with Shares and Coupons: A Laboratory Experiment," The Energy Journal, International Association for Energy Economics, International Association for Energy Economics, vol. 0(Number 2), pages 185-211.
  2. Stuart Mestelman & Andrew Muller, 1997. "Emissions Trading with Shares and Coupons when Control over Discharges is Uncertain," McMaster Experimental Economics Laboratory Publications, McMaster University 1997-01, McMaster University.
  3. Ledyard, John O. & Szakaly, Kristin E., . "Designing Organizations for Trading Pollution Rights," Working Papers, California Institute of Technology, Division of the Humanities and Social Sciences 838, California Institute of Technology, Division of the Humanities and Social Sciences.
  4. Stuart Mestelman & Rob Moir & Andrew Muller, 1998. "A Laboratory Test of Canadian Proposals for an Emission Trading Program," McMaster Experimental Economics Laboratory Publications, McMaster University 1998-03, McMaster University.
  5. Plott, Charles R, 1983. "Externalities and Corrective Policies in Experimental Markets," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 93(369), pages 106-27, March.
  6. Hahn, Robert W, 1989. "Economic Prescriptions for Environmental Problems: How the Patient Followed the Doctor's Orders," Journal of Economic Perspectives, American Economic Association, American Economic Association, vol. 3(2), pages 95-114, Spring.
  7. Jamie Brown-Kruse & Steven R Elliot & Rob Godby, 1995. "Strategic Manipulation of Pollution Permit Markets: An Experimental Approach," Department of Economics Working Papers 1995-03, McMaster University.
  8. Cason Timothy N., 1993. "Seller Incentive Properties of EPA's Emission Trading Auction," Journal of Environmental Economics and Management, Elsevier, vol. 25(2), pages 177-195, September.
  9. Cason, Timothy N, 1995. "An Experimental Investigation of the Seller Incentives in the EPA's Emission Trading Auction," American Economic Review, American Economic Association, American Economic Association, vol. 85(4), pages 905-22, September.
  10. Cason, Timothy N. & Plott, Charles R., 1996. "EPA's New Emissions Trading Mechanism: A Laboratory Evaluation," Journal of Environmental Economics and Management, Elsevier, vol. 30(2), pages 133-160, March.
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Citations

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Cited by:
  1. Donald Larson & Gunnar Breustedt, 2009. "Will Markets Direct Investments Under the Kyoto Protocol? Lessons from the Activities Implemented Jointly Pilots," Environmental & Resource Economics, European Association of Environmental and Resource Economists, European Association of Environmental and Resource Economists, vol. 43(3), pages 433-456, July.
  2. Luca Taschini & Marc Chesney & Mei Wang, 2014. "Experimental comparison between markets on dynamic permit trading and investment in irreversible abatement with and without non-regulated companies," Journal of Regulatory Economics, Springer, Springer, vol. 46(1), pages 23-50, August.
  3. Eva Camacho-Cuena & Till Requate & Israel Waichman, 2012. "Investment Incentives under Emission Trading: An Experimental Study," Working Papers, Economics Department, Universitat Jaume I, Castellón (Spain) 2012/22, Economics Department, Universitat Jaume I, Castellón (Spain).
  4. Hizen, Y. & Saijo, T., 2000. "Designing GHG Emissions Trading Institutions in the Kyoto Protocol: an Experimental Approach," ISER Discussion Paper, Institute of Social and Economic Research, Osaka University 0492, Institute of Social and Economic Research, Osaka University.
  5. Paul Healy & John Ledyard & Charles Noussair & Harley Thronson & Peter Ulrich & Giulio Varsi, 2007. "Contracting inside an organization: An experimental study," Experimental Economics, Springer, Springer, vol. 10(2), pages 143-167, June.
  6. Charlotte Duke & Lata Gangadharan, 2005. "Regulation in Environmental Markets: What Can We Learn from Experiments to Reduce Salinity?," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 38(4), pages 459-469, December.
  7. Bohm, Peter, 2003. "Experimental evaluations of policy instruments," Handbook of Environmental Economics, Elsevier, in: K. G. Mäler & J. R. Vincent (ed.), Handbook of Environmental Economics, edition 1, volume 1, chapter 10, pages 437-460 Elsevier.
  8. Robert Godby, 2002. "Market Power in Laboratory Emission Permit Markets," Environmental & Resource Economics, European Association of Environmental and Resource Economists, European Association of Environmental and Resource Economists, vol. 23(3), pages 279-318, November.
  9. Schleich, Joachim & Ehrhart, Karl-Martin & Hoppe, Christian & Seifert, Stefan, 2004. "Banning banking in EU emissions trading?," Sonderforschungsbereich 504 Publications, Sonderforschungsbereich 504, Universität Mannheim;Sonderforschungsbereich 504, University of Mannheim 04-60, Sonderforschungsbereich 504, Universität Mannheim;Sonderforschungsbereich 504, University of Mannheim.
  10. Andreas Nicklisch & Leon Zucchini, . "Dynamic Efficiency of Emission Trading Markets: An Experimental Study," Papers on Strategic Interaction, Max Planck Institute of Economics, Strategic Interaction Group 2005-07, Max Planck Institute of Economics, Strategic Interaction Group.
  11. Larson, Donald F. & Breustedt, Gunnar, 2007. "Will markets direct investments under the Kyoto Protocol ?," Policy Research Working Paper Series 4131, The World Bank.
  12. Hizen, Y. & Saijo, T., 2000. "Price Desclosure, Marginal Abatement Cost Information and Market Power in a Bilateral GHG Emissions Trading Experiment," ISER Discussion Paper, Institute of Social and Economic Research, Osaka University 0515, Institute of Social and Economic Research, Osaka University.
  13. Lisa R. Anderson & Sarah L. Stafford, 2000. "Choosing Winners and Losers in a Classroom Permit Trading Game," Southern Economic Journal, Southern Economic Association, vol. 67(1), pages 212-219, July.
  14. Yoichi Hizen & Takao Kusakawa & Hidenori NiizawaAuthor-Name: & Tatsuyoshi Saijo, 2001. "Two Patterns of Price Dynamics were Observed in Greenhouse Gases Emissions Trading Experiment: An Application of Point Equilibrium," ISER Discussion Paper, Institute of Social and Economic Research, Osaka University 0557, Institute of Social and Economic Research, Osaka University.
  15. Beat Hintermann, 2011. "Market Power, Permit Allocation and Efficiency in Emission Permit Markets," Environmental & Resource Economics, European Association of Environmental and Resource Economists, European Association of Environmental and Resource Economists, vol. 49(3), pages 327-349, July.
  16. NeilJ. Buckley & Stuart Mestelman & R.Andrew Muller, 2006. "Implications Of Alternative Emission Trading Plans: Experimental Evidence," Pacific Economic Review, Wiley Blackwell, Wiley Blackwell, vol. 11(2), pages 149-166, 06.
  17. Beat Hintermann, 2013. "Market Power in Emission Permit Markets: Theory and Evidence," CESifo Working Paper Series 4447, CESifo Group Munich.
  18. Marc Chesney & Luca Taschini & Mei Wang, 2011. "Regulated and non-regulated companies, technology adoption in experimental markets for emission permits, and options contracts," LSE Research Online Documents on Economics, London School of Economics and Political Science, LSE Library 37577, London School of Economics and Political Science, LSE Library.
  19. L. Gangadharan & A. Farrell & R. Croson, 2005. "Investment Decisions and Emissions Reductions : Results from Experiments in Emissions Trading," Department of Economics - Working Papers Series, The University of Melbourne 942, The University of Melbourne.

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