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The Temporal Efficiency of SO2 Emissions Trading

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Author Info
Ellerman, A.D.
Juan-Pablo Montero

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Abstract

This paper provides an empirical evaluation of the temporal efficiency of the US Acid Rain Program, which implemented a nationwide market for trading and banking sulphur dioxide (SO2) emission allowances. We first develop a model of efficient banking and select appropriate parameter values. Then we use aggregate data from the first seven years of the Acid Rain Program to access the temporal efficiency of the observed banking behaviour. We find that banking has been surprisingly efficient and we discuss why this finding disagrees with the common perception of excessive banking in this program.

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File URL: http://www.econ.cam.ac.uk/electricity/publications/wp/ep13.pdf
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Publisher Info
Paper provided by Faculty of Economics, University of Cambridge in its series Cambridge Working Papers in Economics with number 0231.

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Length: 26
Date of creation: Oct 2002
Date of revision:
Handle: RePEc:cam:camdae:0231

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Web page: http://www.econ.cam.ac.uk/index.htm

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Related research
Keywords: emissions trading; banking; acid rain; tradable permits;

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This paper has been announced in the following NEP Reports: References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Farrow, Scott, 1985. "Testing the Efficiency of Extraction from a Stock Resource," Journal of Political Economy, University of Chicago Press, vol. 93(3), pages 452-87, June. [Downloadable!] (restricted)
  2. Rubin, Jonathan D., 1996. "A Model of Intertemporal Emission Trading, Banking, and Borrowing," Journal of Environmental Economics and Management, Elsevier, vol. 31(3), pages 269-286, November. [Downloadable!] (restricted)
  3. Juan Pablo Montero, 2002. "Testing the Efficiency of a Tradeable Permits Market," Documentos de Trabajo 224, Instituto de Economía. Pontificia Universidad Católica de Chile.. [Downloadable!]
  4. Margaret E. Slade & Henry Thille, 1997. "Hotelling Confronts CAPM: A Test of the Theory of Exhaustible Resources," Canadian Journal of Economics, Canadian Economics Association, vol. 30(3), pages 685-708, August. [Downloadable!] (restricted)
    Other versions:
  5. Cronshaw, Mark B & Brown-Kruse, Jamie, 1996. "Regulated Firms in Pollution Permit Markets with Banking," Journal of Regulatory Economics, Springer, vol. 9(2), pages 179-89, March.
  6. repec:cup:cbooks:9780521023894 is not listed on IDEAS
Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Julien Pierre Chevallier, 2007. "A differential game of intertemporal emissions trading with market power," EconomiX Working Papers 2007-18, University of Paris West - Nanterre la Défense, EconomiX. [Downloadable!]
  2. Matti Liski & Juan Pablo Montero, 2003. "A Note on Market Power in an Emission Permits Market with Banking," Documentos de Trabajo 236, Instituto de Economía. Pontificia Universidad Católica de Chile.. [Downloadable!]
    Other versions:
  3. Juan-Pablo Montero, 2004. "Markets for environmental protection: design and performance incomplete enforcement," Estudios de Economia, University of Chile, Department of Economics, vol. 31(1 Year 20), pages 79-99, June. [Downloadable!]
  4. John Stranlund & Christopher Costello & Carlos Chávez, 2005. "Enforcing Emissions Trading when Emissions Permits are Bankable," Journal of Regulatory Economics, Springer, vol. 28(2), pages 181-204, 09. [Downloadable!] (restricted)
  5. Julien Chevallier, 2009. "Intertemporal Emissions Trading and Allocation Rules: Gainers, Losers and the Spectre of Market Power," Working Papers halshs-00124713_v1, HAL. [Downloadable!]
  6. Ehrhart, Karl-Martin & Hoppe, Christian & Schleich, Joachim & Seifert, Stefan, 2004. "Emissions Trading and the Optimal Timing of Production," Sonderforschungsbereich 504 Publications 04-55, Sonderforschungsbereich 504, Universität Mannheim & Sonderforschungsbereich 504, University of Mannheim.
  7. Emilie Alberola & Julien Pierre Chevallier, 2007. "European carbon prices and banking restrictions: evidence from phase I (2005-2007)," EconomiX Working Papers 2007-32, University of Paris West - Nanterre la Défense, EconomiX. [Downloadable!]
    Other versions:
  8. Juan Pablo Montero, 2002. "Testing the Efficiency of a Tradeable Permits Market," Documentos de Trabajo 224, Instituto de Economía. Pontificia Universidad Católica de Chile.. [Downloadable!]
  9. Juan Pablo Montero, 2004. "Markets for Environmental Protection; Desing and Performance," Documentos de Trabajo 269, Instituto de Economía. Pontificia Universidad Católica de Chile.. [Downloadable!]
  10. Julien Chevallier, 2009. "Intertemporal Emissions Trading and Market Power: A Dominant Firm with Competitive Fringe Model," Working Papers halshs-00388207_v1, HAL. [Downloadable!]
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