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Transaction costs and tradable permits: Empirical evidence from the EU emissions trading scheme

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  • Heindl, Peter

Abstract

In this paper, transaction costs in the EU emissions trading scheme (EU ETS) are examined empirically based on survey data from German companies. Transaction costs from measurement, reporting and verification (MRV) of emissions, permit trading and general informational costs are considered. Transaction costs from MRV and permit trading are of non-linear form and dependent on annual emission and trading volumes based on OLS and nonparametric estimation. As a consequence of non-linear transaction costs, welfare losses occur compared to a first-best setup under zero transaction costs. In practice, smaller emitters will emit less (abate more) compared to larger emitters and vice versa due to economies of scale in the management of emissions trading. The results further imply that optimal firm size might be influenced by transaction costs in the EU ETS because of relatively high average transaction costs amongst smaller emitters. Overall annual transaction costs in the EU ETS in Germany are estimated to be EUR 8.7 million. --

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Bibliographic Info

Paper provided by ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research in its series ZEW Discussion Papers with number 12-021.

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Date of creation: 2012
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Handle: RePEc:zbw:zewdip:12021

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Keywords: Emissions Trading; Transaction Costs; EU ETS;

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References

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Cited by:
  1. Heindl, Peter, 2012. "Mitigating market power under tradeable permits," ZEW Discussion Papers 12-065, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  2. Singh, Rajesh & Weninger, Quinn, 2014. "Cap and Trade under Transactions Costs," Staff General Research Papers 37453, Iowa State University, Department of Economics.
  3. Koesler, Simon & Achtnicht, Martin & Köhler, Jonathan, 2012. "Capped steam ahead: A case study among ship operators on a maritime ETS," ZEW Discussion Papers 12-044, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  4. Heindl, Peter & Lutz, Benjamin, 2012. "Carbon management: Evidence from case studies of German firms under the EU ETS," ZEW Discussion Papers 12-079, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  5. Peter Heindl & Sebastian Voigt, 2012. "Supply and demand structure for international offset permits under the Copenhagen Pledges," International Environmental Agreements: Politics, Law and Economics, Springer, vol. 12(4), pages 343-360, November.
  6. Heindl, Peter, 2012. "Financial intermediaries and emissions trading market development and pricing strategies," ZEW Discussion Papers 12-064, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.

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