Emission Trading with Shares and Coupons : A Laboratory Experiment
AbstractIncreasing attention is being paid to emission trading programs for the control of air and water pollution. The United States EPA has implemented a tradable emission allowance program for sulphur oxide. The EPA auction has been investigated in the laboratory by Cronshaw and Brown-Kruse and by Franciosi, Isaac, Pingry, and Reynolds. A somewhat different proposal has been made for controlling nitrous oxides in southern Ontario. Trade would occur in coupons (emission permits) and shares (entitlements to coupons). This paper reports a laboratory investigation of the Canadian proposal in which the experimental design developed by Cronshaw and Brown-Kruse was modified to reflect the proposed Canadian institution. The results indicate dispersed but relatively stable prices, higher efficiency than obtained in related experiments modelling the EPA plan, and little arbitrage between share and coupon prices. The results could be due to differences in the market institutions or the training of the subjects.
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Bibliographic InfoPaper provided by McMaster University in its series McMaster Experimental Economics Laboratory Publications with number 1994-01.
Length: 35 pages
Date of creation: Jan 1994
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Other versions of this item:
- R. Andrew Muller & Stuart Mestelman, 1994. "Emission Trading with Shares and Coupons: A Laboratory Experiment," The Energy Journal, International Association for Energy Economics, vol. 0(Number 2), pages 185-211.
- F0 - International Economics - - General
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- Tisdell, John G. & Grainger, Corinne, 2008.
"An Experimental Economic Analysis of Carbon Trading Options for Australia,"
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- Tisdell, John G. & Grainger, Corinne, 2009. "An Experimental Economic Analysis of Carbon Trading Options for Australia," 2009 Conference, August 16-22, 2009, Beijing, China 51044, International Association of Agricultural Economists.
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McMaster Experimental Economics Laboratory Publications
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