Allocating Risks in a Domestic Greenhouse Gas Trading System
AbstractAs tradeable permit programmes mature, two inter-related issues are becoming more critical in creating viable responses to a long-term, highly uncertain environmental problem such as climate change. First, we need to update policies in response to new information; and second, we need to design policies so that they can be updated without creating adverse strategic incentives for either government or regulated entities. Consideration of both exogenous risk (uncontrollable) and endogenous risk (concerns about policy credibility) suggests that permits should be auctioned several years in advance of use, and each permit should be defined as a percentage of a possibly varying target. For exogenous risks, this system allows all risk to be pooled and managed as efficiently as possible within the private sector. For endogenous risk, it creates a vested interest that will pressure government to maintain or strengthen targets to offset the obvious pressures to weaken regulation. It also reduces the ability of government to reallocate rents without cost to itself, or to gain revenue by altering targets. In addition, policy should be made as complete and as transparent as possible, and its key elements should be embedded in legislation to limit prospects for capricious changes in the future.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Motu Economic and Public Policy Research in its series Working Papers with number 03_01.
Length: 12 pages
Date of creation: Mar 2003
Date of revision:
Other versions of this item:
- Suzi Kerr, 2003. "Allocating Risks in a Domestic Greenhouse Gas Trading System," Others 0309003, EconWPA.
- H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
- H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
- L71 - Industrial Organization - - Industry Studies: Primary Products and Construction - - - Mining, Extraction, and Refining: Hydrocarbon Fuels
- Q25 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Water
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.:
- Stavins, Robert N., 1996. "Correlated Uncertainty and Policy Instrument Choice," Journal of Environmental Economics and Management, Elsevier, vol. 30(2), pages 218-232, March.
- Newell, Richard G. & Pizer, William A., 2003.
"Regulating stock externalities under uncertainty,"
Journal of Environmental Economics and Management,
Elsevier, vol. 45(2, Supple), pages 416-432, March.
- Cramton, Peter & Kerr, Suzi, 2002.
"Tradeable carbon permit auctions: How and why to auction not grandfather,"
Elsevier, vol. 30(4), pages 333-345, March.
- Kerr, Suzi & Cramton, Peter, 1998. "Tradable Carbon Permit Auctions: How and Why to Auction Not Grandfather," Discussion Papers dp-98-34, Resources For the Future.
- Peter Cramton & Suzi Kerr, 2002. "Tradeable Carbon Permit Auctions: How and Why to Auction Not Grandfather," Papers of Peter Cramton 02eptc, University of Maryland, Department of Economics - Peter Cramton, revised 06 May 2002.
- Arrow, Kenneth J & Lind, Robert C, 1970. "Uncertainty and the Evaluation of Public Investment Decisions," American Economic Review, American Economic Association, vol. 60(3), pages 364-78, June.
- Grimes, Arthur, 2005.
"Regional and industry cycles in Australasia: Implications for a common currency,"
Journal of Asian Economics,
Elsevier, vol. 16(3), pages 380-397, June.
- Arthur Grimes, 2005. "Regional and Industry Cycles in Australasia: Implications for a Common Currency," Macroeconomics 0509020, EconWPA.
- Arthur Grimes, 2005. "Regional and Industry Cycles in Australasia: Implications for a Common Currency," Working Papers 05_04, Motu Economic and Public Policy Research.
- Isabelle Sin & Suzi Kerr & Joanna Hendy, 2005. "Taxes vs Permits: Options for Price-Based Climate Change Regulation," Treasury Working Paper Series 05/02, New Zealand Treasury.
- Michelle Poland & David C Maré, 2005.
"Defining Geographic Communities,"
- Arthur Grimes, 2005. "Intra & Inter-Regional Industry Shocks: A New Metric with an Application to Australasian Currency Union," Macroeconomics 0509019, EconWPA.
- David C. Maré, 2005.
"Indirect Effects of Active Labour Market Policies,"
05_01, Motu Economic and Public Policy Research.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Tui Head).
If references are entirely missing, you can add them using this form.