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On the Sequential Choice of Tradable Permit Allocations

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Author Info
Ian A. MacKenzie, () (CER-ETH - Center of Economic Research at ETH Zurich, Switzerland)
Abstract

This paper investigates the sequential announcement of domestic emissions caps by regulators in a federal or international-based tradable pollution permit market for a transboundary pollutant. A leader-follower framework is used to analyse the consequences of regulators sequentially announcing domestic allocation caps. We find the sequential choice of domestic allocation caps is sub-optimal and depends on the follower's reaction to the leader's choice. Furthermore, the marginal damage and the degree to which allocations are substitutes or complements affects whether the leader changes from being a net permit buyer (seller) of permits to a seller (buyer).

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Paper provided by CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich in its series CER-ETH Economics working paper series with number 08/83.

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Length: 41 pages
Date of creation: Mar 2008
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Handle: RePEc:eth:wpswif:08-83

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Related research
Keywords: Initial allocation; international tradable permit market; leader-follower;

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Find related papers by JEL classification:
D78 - Microeconomics - - Analysis of Collective Decision-Making - - - Positive Analysis of Policy-Making and Implementation
L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
Q28 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Government Policy

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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.:
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  2. Brunnschweiler, Christa N. & Bulte, Erwin H., 2008. "The resource curse revisited and revised: A tale of paradoxes and red herrings," Journal of Environmental Economics and Management, Elsevier, vol. 55(3), pages 248-264, May. [Downloadable!] (restricted)
    Other versions:
  3. Moritz Schularick & Thomas Steger, 2006. "Does Financial Integration Spur Economic Growth? New Evidence from the First Era of Financial Globalization," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
    Other versions:
  4. Gersbach, Hans & Winkler, Ralph, 2007. "On the Design of Global Refunding and Climate Change," CEPR Discussion Papers 6379, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  5. Gersbach, Hans / Fahrenberger, Theresa, 2008. "Minority Voting and Long-term Decisions," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
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  6. Silva, Emilson C. D. & Caplan, Arthur J., 1997. "Transboundary Pollution Control in Federal Systems," Journal of Environmental Economics and Management, Elsevier, vol. 34(2), pages 173-186, October. [Downloadable!] (restricted)
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  10. Oliver Grimm & Stefan Ried, 2007. "Macroeconomic Policy in a Heterogeneous Monetary Union," CER-ETH Economics working paper series 07/67, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich. [Downloadable!]
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  11. Hans Gersbach & Hans Haller, 2007. "Hierarchical Trade and Endogenous Price Distortions," CER-ETH Economics working paper series 07/72, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich. [Downloadable!]
  12. Damian S. Damianov & Johannes Gerd Becker, 2008. "Auctions with Variable Supply: Uniform Price versus Discriminatory," CER-ETH Economics working paper series 08/80, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich. [Downloadable!]
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  14. Christian Bjørnskov & Axel Dreher & Justina Fischer, 2007. "The bigger the better? Evidence of the effect of government size on life satisfaction around the world," Public Choice, Springer, vol. 130(3), pages 267-292, March. [Downloadable!] (restricted)
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  15. Theresa Fahrenberger & Hans Gersbach, 2007. "Legislative Process with Open Rules," CER-ETH Economics working paper series 07/64, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich. [Downloadable!]
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  16. Simone Valente, 2007. "Human Capital, Resource Constraints and Intergenerational Fairness," CER-ETH Economics working paper series 07/68, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich. [Downloadable!]
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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. Gersbach, Hans & Winkler, Ralph, 2008. "International Emission Permit Markets with Refunding," CEPR Discussion Papers 7035, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
    Other versions:
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