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Emissions Permits Markets and Dominant Firms

Author

Listed:
  • Manel Antelo

    (Departamento de Fundamentos da Análise Económica, Universidade de Santiago de Compostela)

  • Lluís Bru

    (Departament d'Economia de l'Empresa, Universitat delles Illes Balears)

Abstract

In 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.

Suggested Citation

  • Manel Antelo & Lluís Bru, 2004. "Emissions Permits Markets and Dominant Firms," Documentos de trabajo - Analise Economica 0031, IDEGA - Instituto Universitario de Estudios e Desenvolvemento de Galicia.
    • Handle: RePEc:edg:anecon:0031
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    More about this item

    Keywords

    emissions permits; market power; grandfathering; auction; bargaining;
    All these keywords.

    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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