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Dominant Agent and Intertemporal Emissions Trading

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Author Info
Hagem , Cathrine () (Dept. of Economics, University of Oslo)
Westskog, Hege () (CICERO, Center for International Climate and Environmental Research,)
Abstract

In this paper we analyze how restricting intertemporal trading by prohibiting borrowing of emission permits affects the ability of a dominant agent to exploit its market power, and the consequences this has for the cost-effectiveness of implementing an emissions target. We show that the monopolist could take advantage of the constraint on borrowing by distributing the sale of permits ineffectively across periods, and moreover that this inefficiency is influenced by the way permits are initially allocated between agents. A cost-effective distribution of abatement across periods can be achieved by an appropriate distribution of the total endowments of permits over time for each agent.

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File URL: http://www.oekonomi.uio.no/memo/memopdf/memo0405.pdf
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Publisher Info
Paper provided by Oslo University, Department of Economics in its series Memorandum with number 04/2005.

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Length: 35 pages
Date of creation: 06 Apr 2005
Date of revision:
Handle: RePEc:hhs:osloec:2005_004

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Postal: Department of Economics, University of Oslo, P.O Box 1095 Blindern, N-0317 Oslo, Norway
Phone: 22 85 51 27
Fax: 22 85 50 35
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Web page: http://www.oekonomi.uio.no/indexe.html
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Related research
Keywords: pollution permits; intertemporal trading; market power; borrowing constraint;

Find related papers by JEL classification:
D92 - Microeconomics - - Intertemporal Choice and Growth - - - Intertemporal Firm Choice and Growth, Investment, or Financing
H74 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Borrowing
Q52 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Pollution Control Costs; Distributional Effects; Employment Effects

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References listed on IDEAS
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. Stiglitz, Joseph E, 1976. "Monopoly and the Rate of Extraction of Exhaustible Resources," American Economic Review, American Economic Association, vol. 66(4), pages 655-61, September. [Downloadable!] (restricted)
  2. Schmalensee, Richard, 1981. "Output and Welfare Implications of Monopolistic Third-Degree Price Discrimination," American Economic Review, American Economic Association, vol. 71(1), pages 242-47, March. [Downloadable!] (restricted)
    Other versions:
  3. Varian, Hal R, 1985. "Price Discrimination and Social Welfare," American Economic Review, American Economic Association, vol. 75(4), pages 870-75, September. [Downloadable!] (restricted)
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