Emissions Permits Markets and Dominant Firms
AbstractIn this paper, the implementation of some schemes proposed in the literature for allocating emissions permits among pollutant firms, given a cap on total national emissions, is examined in the context of firms exerting market power in the (intermediate) emissions permits market. For that, we propose a partial equilibrium analysis with a government, consumers, and firms -one firm being a dominant firm with market power in the intermediate emissions permits market, and the rest of firms being competitive in such market. We find that the presence of a dominant firm in the intermediate emissions permits market generates an additional externality, and that a secondary market of emissions permits (in addition to a previous auction) does not solve such inefficiency. The context in which the dominant firm is "removed from the emissions permits market" by a (tax collector) government to obtain its permits through bilateral bargaining with the government rather than through the market is also explored.
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Bibliographic InfoPaper provided by IDEGA - Instituto Universitario de Estudios e Desenvolvemento de Galicia in its series Documentos de trabajo - Analise Economica with number 0031.
Length: 40 pages
Date of creation: 2004
Date of revision:
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emissions permits; market power; grandfathering; auction; bargaining;
Find related papers by JEL classification:
- Q2 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation
- L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
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