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Firm Trading Behaviour and Transaction Costs in the European Union’s Emission Trading System: An Empirical Assessment

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Author Info

  • Jaraite, Jurate

    ()
    (CERE, Centre for Environmental and Resource Economics)

  • Kažukauskas, Andrius

    ()
    (CERE, Centre for Environmental and Resource Economics)

Abstract

To the best of our knowledge, this study is one of the first to empirically analyse the trading behaviour of all ETS firms during the first phase of the EU’s Emissions Trading System. We use a unique dataset which allows investigating the importance of permit trading transaction costs, such as information costs and search costs. This paper shows that transaction costs can play an important role in the initial years of the programme. These costs are significant in explaining why a number of ETS firms did not sell their unused allowances on the market. This study also supports the concerns that transaction costs might be excessive for smaller participants.

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File URL: http://www-sekon.slu.se/~gbost/CERE_WP2012-9.pdf
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Bibliographic Info

Paper provided by CERE - the Center for Environmental and Resource Economics in its series CERE Working Papers with number 2012:9.

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Length: 16 pages
Date of creation: 01 Mar 2012
Date of revision:
Handle: RePEc:hhs:slucer:2012_009

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Web page: http://www.cere.se

Related research

Keywords: emission trading; Europe; firm level data; transaction costs;

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References

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  1. Stavins Robert N., 1995. "Transaction Costs and Tradeable Permits," Journal of Environmental Economics and Management, Elsevier, vol. 29(2), pages 133-148, September.
  2. A. Denny Ellerman and Raphael Trotignon, 2009. "Cross Border Trading and Borrowing in the EU ETS," The Energy Journal, International Association for Energy Economics, vol. 0(Special I).
  3. Cason, Timothy N & Gangadharan, Lata, 2003. "Transactions Costs in Tradable Permit Markets: An Experimental Study of Pollution Market Designs," Journal of Regulatory Economics, Springer, vol. 23(2), pages 145-65, March.
  4. Lata Gangadharan, 2000. "Transaction Costs in Pollution Markets: An Empirical Study," Land Economics, University of Wisconsin Press, vol. 76(4), pages 601-614.
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Cited by:
  1. Heindl, Peter & Lutz, Benjamin, 2012. "Carbon management: Evidence from case studies of German firms under the EU ETS," ZEW Discussion Papers 12-079, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  2. Aleksandar Zaklan, 2013. "Why Do Emitters Trade Carbon Permits?: Firm-Level Evidence from the European Emission Trading Scheme," Discussion Papers of DIW Berlin 1275, DIW Berlin, German Institute for Economic Research.

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