A Note on Market Power in an Emission Permits Market with Banking
AbstractIn this paper, we investigate the effect of market power on the equilibrium path of an emission permits market in which firms can bank current permits for use in later periods. In particular, we study the market equilibrium for a large (potentially dominant) firm and a competitive fringe with rational expectations. Rather than providing a full description of the equilibrium solution for all combinations of permits allocations and cost structures, we provide a characterization of the equilibrium solution for a few illustrative cases. For example, we find that if the large firm enjoys a dominant position in the after-banking market, it can always extend this dominant position to the market during the banking period regardless of the allocation of the stock (bank) of permits.
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Bibliographic InfoPaper provided by Instituto de Economia. Pontificia Universidad Católica de Chile. in its series Documentos de Trabajo with number 236.
Date of creation: 2003
Date of revision:
Publication status: Published as "A Note on Market Power in an Emission Permits Market with Banking", Environmental and Resource Economics 31, 159-173, 2005.
Other versions of this item:
- Matti Liski & Juan-Pablo Montero, 2005. "A Note on Market Power in an Emission Permits Market with Banking," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 31(2), pages 159-173, 06.
- Matti Liski & Juan-Pablo Montero, 2004. "A Note on Market Power in an Emission Permits Market with Banking," Working Papers 0405, Massachusetts Institute of Technology, Center for Energy and Environmental Policy Research.
- Q52 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Pollution Control Costs; Distributional Effects; Employment Effects
- L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
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