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Price Floors for Emissions Trading

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  • Peter Wood

    ()
    (Resource Management in Asia-Pacific Program, Crawford School of Public Policy, Australian National University)

  • Frank Jotzo

    ()
    (Research School of Pacific and Asian Studies,College of Asia and Pacific, Australian National University)

Abstract

Price floors in greenhouse gas emissions trading schemes can have advantages for technological innovation, price volatility, and management of cost uncertainty, but implementation has pitfalls. We argue that the best mechanism for implementing a price floor is by way of firms paying an extra fee or tax. This has budgetary advantages and is more compatible with international permit trading than alternative approaches that dominate the academic and policy debate. The fee approach can also be used to implement more general hybrid approaches to emissions pricing.

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File URL: https://crawford.anu.edu.au/research_units/eerh/pdf/EERH_RR36.pdf
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Bibliographic Info

Paper provided by Environmental Economics Research Hub, Crawford School of Public Policy, The Australian National University in its series Environmental Economics Research Hub Research Reports with number 0936.

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Date of creation: Oct 2009
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Handle: RePEc:een:eenhrr:0936

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Keywords: Price floor; price ceiling; carbon tax; emissions trading; carbon pricing; price and quantity controls; Waxman-Markey Bill.;

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References

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  1. Flavio Menezes & John Quiggin & Liam Wagner, 2008. "Grandfathering and greenhouse: the role of compensation and adjustment assistance in the introduction of a carbon emissions trading scheme for Australia," Climate Change Working Papers WPC08_4, Risk and Sustainable Management Group, University of Queensland, revised 2008.
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Citations

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Cited by:
  1. Asproudis, Elias & Weyman-Jones, Tom, 2011. "Third parties �participation in tradable permits market. Do we need them?," MPRA Paper 28766, University Library of Munich, Germany.
  2. Peter Heindl & Sebastian Voigt, 2012. "Supply and demand structure for international offset permits under the Copenhagen Pledges," International Environmental Agreements: Politics, Law and Economics, Springer, vol. 12(4), pages 343-360, November.
  3. Lawrence H. Goulder & Andrew Schein, 2013. "Carbon Taxes vs. Cap and Trade: A Critical Review," NBER Working Papers 19338, National Bureau of Economic Research, Inc.
  4. Hasegawa, Makoto & Salant, Stephen, 2012. "Cap-and-Trade Programs under Continual Compliance," Discussion Papers dp-12-33, Resources For the Future.
  5. Rohlfs, Wilko & Madlener, Reinhard, 2011. "Multi-Commodity Real Options Analysis of Power Plant Investments: Discounting Endogenous Risk Structures," FCN Working Papers 22/2011, E.ON Energy Research Center, Future Energy Consumer Needs and Behavior (FCN).
  6. Higgins, Paul A.T., 2013. "Frameworks for pricing greenhouse gas emissions and the policy objectives they promote," Energy Policy, Elsevier, vol. 62(C), pages 1301-1308.
  7. Brauneis, Alexander & Mestel, Roland & Palan, Stefan, 2013. "Inducing low-carbon investment in the electric power industry through a price floor for emissions trading," Energy Policy, Elsevier, vol. 53(C), pages 190-204.
  8. Frank Jotzo, 2013. "Emissions Trading in China: Principles, Design Options and Lessons from International Practice," CCEP Working Papers 1303, Centre for Climate Economics & Policy, Crawford School of Public Policy, The Australian National University.
  9. Federico Boffa & Stefano Clò & Alessio D'Amato, 2013. "Environmental policy and incentives to adopt abatement technologies under endogenous uncertainty," Working Papers 5, Department of the Treasury, Ministry of the Economy and of Finance.
  10. Heindl, Peter & Voigt, Sebastian, 2011. "A practical approach to offset permits in post Kyoto climate policy," ZEW Discussion Papers 11-043, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  11. Claudia Kettner & Daniela Kletzan-Slamanig & Angela Köppl & Thomas Schinko & Andreas Türk, 2011. "ETCLIP – The Challenge of the European Carbon Market: Emission Trading, Carbon Leakage and Instruments to Stabilise the CO2 Price. Price Volatility in Carbon Markets: Why it Matters and How it Can b," WIFO Working Papers 409, WIFO.

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