Investment Incentives under Emission Trading: An Experimental Study
AbstractThis paper presents the results of an experimental investigation on incentives to adopt advanced abatement technology under emissions trading. Our experimental design mimics an industry with small asymmetric polluting firms regulated by different schemes of tradable permits. We consider three allocation/auction policies: auctioning off (costly) permits through an ascending clock auction, grandfathering permits with re-allocation through a single-unit double auction, and grandfathering with reallocation through an ascending clock auction. Our results confirm both dynamic and static theoretical equivalence of auctioning and grandfathering. We nevertheless find that although the market institution used to reallocate permits does not impact the dynamic efficiency from investment, it affects the static efficiency from permit trading.
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Bibliographic InfoPaper provided by Economics Department, Universitat Jaume I, Castellón (Spain) in its series Working Papers with number 2012/22.
Length: 41 pages
Date of creation: 2012
Date of revision:
Environmental policy; abatement technology; taxes; permit trading; auctions opportunity; Ultimatum Game;
Other versions of this item:
- Eva Camacho-Cuena & Till Requate & Israel Waichman, 2012. "Investment Incentives Under Emission Trading: An Experimental Study," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 53(2), pages 229-249, October.
- C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior
- D44 - Microeconomics - - Market Structure and Pricing - - - Auctions
- L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
- Q28 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Government Policy
- Q55 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Technological Innovation
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-01-19 (All new papers)
- NEP-ENE-2013-01-19 (Energy Economics)
- NEP-ENV-2013-01-19 (Environmental Economics)
- NEP-EXP-2013-01-19 (Experimental Economics)
- NEP-REG-2013-01-19 (Regulation)
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- Suter, Jordan F. & Spraggon, John M. & Poe, Gregory L., 2011. "Thin and lumpy: an experimental investigation of water quality trading," 2011 Annual Meeting, July 24-26, 2011, Pittsburgh, Pennsylvania 104023, Agricultural and Applied Economics Association.
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