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Distributing pollution rights in cap-and-trade programs : are outcomes independent of allocation?

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Author Info

  • Fowlie, Meredith
  • Perloff, Jeffrey M

    ()
    (University of California, Berkeley. Dept of agricultural and resource economics and policy)

Abstract

According to the Coase theorem, if property rights to pollute are clearly established and emissions permit markets nearly eliminate transaction costs, the permit market equilibrium will be independent of how the permits are initially distributed among …firms. Testing the independence of …firms' permit allocations and emissions is difficult because of endogeneity and omitted variable bias. We exploit the random assignment of …firms to different permit allocation cycles in Southern California's RECLAIM Program to test for a causal relationship between facility-level emissions and initial permit allocations. Our primary …finding is that a null hypothesis of zero effect cannot be rejected.

(This abstract was borrowed from another version of this item.)

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Bibliographic Info

Paper provided by University of California at Berkeley, Department of Agricultural and Resource Economics and Policy in its series CUDARE Working Paper Series with number 0968R.

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Length: 43pages
Date of creation: 2008
Date of revision:
Handle: RePEc:are:cudare:0968r

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Related research

Keywords: air pollution; emissions trading; transaction costs;

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References

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  1. Lata Gangadharan, 2000. "Transaction Costs in Pollution Markets: An Empirical Study," Land Economics, University of Wisconsin Press, vol. 76(4), pages 601-614.
  2. Stavins Robert N., 1995. "Transaction Costs and Tradeable Permits," Journal of Environmental Economics and Management, Elsevier, vol. 29(2), pages 133-148, September.
  3. Juan-Pablo Montero & José Miguel Sánchez & Ricardo Katz, 2000. "A Market-Based Environmental Policy Experiment in Chile," Documentos de Trabajo, Instituto de Economia. Pontificia Universidad Católica de Chile. 192, Instituto de Economia. Pontificia Universidad Católica de Chile..
  4. Shaul Ben-David & David Brookshire & Stuart Burness & Michael McKee & Christian Schmidt, 2000. "Attitudes toward Risk and Compliance in Emission Permit Markets," Land Economics, University of Wisconsin Press, vol. 76(4), pages 590-600.
  5. Michael Ari Prager & Thomas H. Klier & Richard H. Mattoon, 1996. "A mixed bag: assessment of market performance and firm trading behavior in the NOx RECLAIM program," Working Paper Series, Regional Economic Issues WP-96-12, Federal Reserve Bank of Chicago.
  6. Montgomery, W. David, 1972. "Markets in licenses and efficient pollution control programs," Journal of Economic Theory, Elsevier, vol. 5(3), pages 395-418, December.
  7. Hahn, Robert W, 1984. "Market Power and Transferable Property Rights," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 99(4), pages 753-65, November.
  8. Stranlund, John K & Chavez, Carlos A, 2000. "Effective Enforcement of a Transferable Emissions Permit System with a Self-Reporting Requirement," Journal of Regulatory Economics, Springer, Springer, vol. 18(2), pages 113-31, September.
  9. Scott Lee Johnson & David M. Pekelney, 1996. "Economic Assessment of the Regional Clean Air Incentives Market: A New Emissions Trading Program for Los Angeles," Land Economics, University of Wisconsin Press, vol. 72(3), pages 277-297.
  10. Reimund Schwarze & Peter Zapfel, 2000. "Sulfur Allowance Trading and the Regional Clean Air Incentives Market: A Comparative Design Analysis of two Major Cap-and-Trade Permit Programs?," Environmental & Resource Economics, European Association of Environmental and Resource Economists, European Association of Environmental and Resource Economists, vol. 17(3), pages 279-298, November.
  11. James H. Stock & Motohiro Yogo, 2002. "Testing for Weak Instruments in Linear IV Regression," NBER Technical Working Papers 0284, National Bureau of Economic Research, Inc.
  12. Montero, Juan-Pablo, 1998. "Marketable pollution permits with uncertainty and transaction costs," Resource and Energy Economics, Elsevier, Elsevier, vol. 20(1), pages 27-50, March.
  13. Arellano, M, 1987. "Computing Robust Standard Errors for Within-Groups Estimators," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 49(4), pages 431-34, November.
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Cited by:
  1. repec:reg:wpaper:588 is not listed on IDEAS
  2. 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.
  3. Hugh McDonald & Suzi Kerr, 2011. "Trading Efficiency in Water Quality Trading Markets: An Assessment of Trade-Offs," Working Papers, Motu Economic and Public Policy Research 11_15, Motu Economic and Public Policy Research.
  4. Olmstead, Sheila M. & Stavins, Robert N., 2010. "Three Key Elements of Post-2012 International Climate Policy Architecture," Discussion Papers, Resources For the Future dp-10-34, Resources For the Future.

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