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Equilibrium with a Market of Permits

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Author Info

  • Gilles Rotillon

    (SEGMI Université Paris X-Nanterre)

  • Pierre-André Jouvet

    (GREQAM, Université de la Méditerranée and GAINS, Université du Maine)

  • Philippe Michel

    (GREQAM, Université de la Méditerranée et EUREQua, Université Paris I)

Abstract

In this paper we present the main results of three original studies on the equilibrium with a market of tradeable permits in a static framework. In first study, we have considered an international equilibrium of two countries which depend on the quantity of permits to each country. The allocation is efficient if and only if it is proportional to efficient labor. A redistribution in favor of the less developed country implies a redistribution to this country but leads to a dilemma with efficiency. In the second study, we analyze the consequences of the choice between giving free permits to firms and other possibilities. We show that for equalizing incomes of production factors with there marginal productivities, each factor should receive a quantity of free permits proportional to its contribution to production. In the third study, we consider the partial equilibrium of an industry where each firm is characterized by a parameter combining production efficiency and pollution effect. We define a theoretical indicator of environmental efficiency and we analyze its properties.

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Bibliographic Info

Paper provided by Fondazione Eni Enrico Mattei in its series Working Papers with number 2004.94.

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Date of creation: Jun 2004
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Handle: RePEc:fem:femwpa:2004.94

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Keywords: Pollution permits; Capital allocation; International equilibrium; Factor income; Environmental efficiency;

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References

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  1. Montgomery, W. David, 1972. "Markets in licenses and efficient pollution control programs," Journal of Economic Theory, Elsevier, vol. 5(3), pages 395-418, December.
  2. P. Michel & P.-A. Jouvet & Gilles Rotillon, 2003. "A theoretical measure of environmental efficiency," THEMA Working Papers 2003-21, THEMA (THéorie Economique, Modélisation et Applications), Université de Cergy-Pontoise.
  3. Ono, Tetsuo, 2001. "The Effects of Emission Permits on Growth and the Environment," Discussion Paper 33, Center for Intergenerational Studies, Institute of Economic Research, Hitotsubashi University.
  4. Stokey, Nancy L, 1998. "Are There Limits to Growth?," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 39(1), pages 1-31, February.
  5. JOUVET, Pierre-André & MICHEL, Philippe & VIDAL, Jean-Pierre, 1997. "Intergenerational altruism and the environment," CORE Discussion Papers 1997041, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  6. P-A. Jouvet & P. Michel & G. Rotillon, 2002. "Capital Allocation and International Equilibrium with Pollution Permits," THEMA Working Papers 2002-02, THEMA (THéorie Economique, Modélisation et Applications), Université de Cergy-Pontoise.
  7. Fare, Rolf, et al, 1989. "Multilateral Productivity Comparisons When Some Outputs Are Undesirable: A Nonparametric Approach," The Review of Economics and Statistics, MIT Press, vol. 71(1), pages 90-98, February.
  8. Hahn, Robert W, 1989. "Economic Prescriptions for Environmental Problems: How the Patient Followed the Doctor's Orders," Journal of Economic Perspectives, American Economic Association, vol. 3(2), pages 95-114, Spring.
  9. Copeland, Brian R & Taylor, M Scott, 1994. "North-South Trade and the Environment," The Quarterly Journal of Economics, MIT Press, vol. 109(3), pages 755-87, August.
  10. Cropper, Maureen L & Oates, Wallace E, 1992. "Environmental Economics: A Survey," Journal of Economic Literature, American Economic Association, vol. 30(2), pages 675-740, June.
  11. Noll, Roger G, 1982. "Implementing Marketable Emissions Permits," American Economic Review, American Economic Association, vol. 72(2), pages 120-24, May.
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Cited by:
  1. Tetsuo Ono, 2007. "Environmental Tax Reform, Economic Growth, and Unemployment in an OLG Economy," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 63(1), pages 133-161, March.
  2. Bednar-Friedl, Birgit & Farmer, Karl, 2010. "External balance, dynamic efficiency, and the welfare effects of unilateral and multilateral permit policies in interdependent economies," Economic Modelling, Elsevier, vol. 27(5), pages 980-990, September.
  3. Birgit Bednar-Friedl & Karl Farmer & Andreas Rainer, 2010. "Effects of Unilateral Climate Policy on Terms of Trade, Capital Accumulation, and Welfare in a World Economy," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 47(4), pages 495-520, December.
  4. Chu, Hsun & Lai, Ching-Chong, 2013. "Abatement R&D, Market Imperfections, and Environmental Policy in an Endogenous Growth Model," MPRA Paper 52869, University Library of Munich, Germany, revised Nov 2013.
  5. Chu, Hsun & Lai, Ching-chong, 2014. "Abatement R&D, market imperfections, and environmental policy in an endogenous growth model," Journal of Economic Dynamics and Control, Elsevier, vol. 41(C), pages 20-37.

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