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Tradable permit allocations and sequential choice

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  • MacKenzie, Ian A.

Abstract

This paper investigates initial allocation choices in an international tradable pollution permit market. For two sovereign governments, we compare allocation choices that are either simultaneously or sequentially announced. We show sequential allocation announcements result in higher (lower) aggregate emissions when announcements are strategic substitutes (complements). Whether allocation announcements are strategic substitutes or complements depends on the relationship between the follower's damage function and governments' abatement costs. When the marginal damage function is relatively steep (flat), allocation announcements are strategic substitutes (complements). For quadratic abatement costs and damages, sequential announcements provide a higher level of aggregate emissions.

Suggested Citation

  • MacKenzie, Ian A., 2011. "Tradable permit allocations and sequential choice," Resource and Energy Economics, Elsevier, vol. 33(1), pages 268-278, January.
  • Handle: RePEc:eee:resene:v:33:y:2011:i:1:p:268-278
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Holtsmark, Bjart & Sommervoll, Dag Einar, 2012. "International emissions trading: Good or bad?," Economics Letters, Elsevier, vol. 117(1), pages 362-364.
    2. Mehdi Fadaee & Luca Lambertini, 2015. "Non-tradeable pollution permits as green R&D incentives," Environmental Economics and Policy Studies, Springer;Society for Environmental Economics and Policy Studies - SEEPS, vol. 17(1), pages 27-42, January.
    3. Keisuke Hattori & Takahiro Kitamura, 2013. "Endogenous Timing in Strategic Environmental Policymaking," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 55(2), pages 199-215, June.
    4. M. Fadaee & L. Lambertini, 2011. "Using Auctions for Pollution Rights as Indirect Incentives for Investments in Green Technologies," Working Papers wp729, Dipartimento Scienze Economiche, Universita' di Bologna.
    5. Nachtigall, Daniel, 2016. "Linking Emissions Trading Schemes in the Presence of Research and Develoment Spillovers," Annual Conference 2016 (Augsburg): Demographic Change 145721, Verein für Socialpolitik / German Economic Association.
    6. Baran Doda, Simon Quemin, Luca Taschini, 2017. "A theory of gains from trade in multilaterally linked ETSs," GRI Working Papers 275, Grantham Research Institute on Climate Change and the Environment.
    7. Birgit Bednar-Friedl, 2012. "Climate policy targets in emerging and industrialized economies: the influence of technological differences, environmental preferences and propensity to save," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 39(2), pages 191-215, May.
    8. Bjart Holtsmark & Dag Einar Sommervoll, 2012. "International emissions trading in a noncooperative climate policy game," Discussion Papers 693, Statistics Norway, Research Department.
    9. repec:pal:jorsoc:v:68:y:2017:i:9:d:10.1057_s41274-016-0123-1 is not listed on IDEAS
    10. Simon Quemin & Christian de Perthuis, 2017. "Transitional Restricted Linkage between Emissions Trading Schemes," Working Papers 2017.31, FAERE - French Association of Environmental and Resource Economists.
    11. Oana-Cãtãlina TÃPURICÃ, 2013. "Advantages and Limits of Using Pollution Control Tools as Strategic Options in the Management of Organizations," REVISTA DE MANAGEMENT COMPARAT INTERNATIONAL/REVIEW OF INTERNATIONAL COMPARATIVE MANAGEMENT, Faculty of Management, Academy of Economic Studies, Bucharest, Romania, vol. 14(4), pages 585-595, October.

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