Strategic Partitioning of Emissions Allowances. Under the EU Emission Trading Scheme
AbstractThe EU Emission Trading Scheme (ETS) is breaking new ground in the experience with emission trading regimes across multiple jurisdictions. Since the EU ETS covers only some industries, it implies a hybrid emission control scheme where EU member states must apply complementary domestic emissions regulation for the non-trading sectors of their economies in order to comply with their national emission reduction targets. The EU ETS thus opens up for strategic partitioning of national emissions budgets by the member states between trading and non-trading sectors. In this paper we examine the potential effects of such strategic behavior on compliance cost and emissions prices. We show that concerns on efficiency losses from strategic partitioning are misplaced if all the member states behave in a Nash-Cournot manner. However, if a single country takes the official partitioning of the other countries as a reference point, there is substantial scope for exploiting market power.
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Bibliographic InfoPaper provided by Research Department of Statistics Norway in its series Discussion Papers with number 538.
Date of creation: Apr 2008
Date of revision:
Emissions Trading; Allocation of Quotas; Strategic Behavior;
Other versions of this item:
- Böhringer, Christoph & Rosendahl, Knut Einar, 2009. "Strategic partitioning of emission allowances under the EU Emission Trading Scheme," Resource and Energy Economics, Elsevier, vol. 31(3), pages 182-197, August.
- C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
- C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
- Q25 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Water
This paper has been announced in the following NEP Reports:
- NEP-ALL-2008-04-21 (All new papers)
- NEP-CSE-2008-04-21 (Economics of Strategic Management)
- NEP-EEC-2008-04-21 (European Economics)
- NEP-ENE-2008-04-21 (Energy Economics)
- NEP-ENV-2008-04-21 (Environmental Economics)
- NEP-GTH-2008-04-21 (Game Theory)
- NEP-REG-2008-04-21 (Regulation)
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