IDEAS home Printed from https://ideas.repec.org/a/eee/soceps/v82y2022ipbs0038012122000507.html
   My bibliography  Save this article

Pollution and environmental quality violations: Finding the right emission permit prices for NO2 EDPs

Author

Listed:
  • Willett, Keith
  • Caplanova, Anetta

Abstract

The paper is focused on the development of the design of a cap-and-trade market that would provide a straightforward method allowing to directly calculate market price(s) and permit trades for multilateral trades. We use the emission discharge permit (EDP) for NO2 emissions as the property right to be traded and consider relevant regional environmental constraints that are always satisfied in each market solution. Next to developing the theoretical formulation of the model, we demonstrate the functioning of the common pool trading model using numerical simulations based on the data taken from studies by the International Institute for Applied Systems Analysis (IIASA). A sensitivity analysis which shows how the system might behave under uncertainty is also presented.

Suggested Citation

  • Willett, Keith & Caplanova, Anetta, 2022. "Pollution and environmental quality violations: Finding the right emission permit prices for NO2 EDPs," Socio-Economic Planning Sciences, Elsevier, vol. 82(PB).
    • Handle: RePEc:eee:soceps:v:82:y:2022:i:pb:s0038012122000507
    DOI: 10.1016/j.seps.2022.101272
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0038012122000507
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.seps.2022.101272?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Montgomery, W. David, 1972. "Markets in licenses and efficient pollution control programs," Journal of Economic Theory, Elsevier, vol. 5(3), pages 395-418, December.
    2. Frans P. Vries & Nick Hanley, 2016. "Incentive-Based Policy Design for Pollution Control and Biodiversity Conservation: A Review," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 63(4), pages 687-702, April.
    3. Porter, David & Rassenti, Stephen & Shobe, William & Smith, Vernon & Winn, Abel, 2009. "The design, testing and implementation of Virginia's NOx allowance auction," Journal of Economic Behavior & Organization, Elsevier, vol. 69(2), pages 190-200, February.
    4. R. H. Coase, 2013. "The Problem of Social Cost," Journal of Law and Economics, University of Chicago Press, vol. 56(4), pages 837-877.
    5. Thomas H. Tietenberg, 1980. "Transferable Discharge Permits and the Control of Stationary Source Air Pollution: A Survey and Synthesis," Land Economics, University of Wisconsin Press, vol. 56(4), pages 391-416.
    6. Napolitano, Sam & Stevens, Gabrielle & Schreifels, Jeremy & Culligan, Kevin, 2007. "The NOx Budget Trading Program: A Collaborative, Innovative Approach to Solving a Regional Air Pollution Problem," The Electricity Journal, Elsevier, vol. 20(9), pages 65-76, November.
    7. Paul Leiby & Jonathan Rubin, 2001. "Intertemporal Permit Trading for the Control of Greenhouse Gas Emissions," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 19(3), pages 229-256, July.
    8. Ger Klaassen & Finn Førsund & Markus Amann, 1994. "Emission trading in Europe with an exchange rate," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 4(4), pages 305-330, August.
    9. Ellis, J. Hugh, 1988. "Multiobjective mathematical programming models for acid rain control," European Journal of Operational Research, Elsevier, vol. 35(3), pages 365-377, June.
    10. Klaassen, Ger & Nentjes, Andries & Smith, Mark, 2005. "Testing the theory of emissions trading: Experimental evidence on alternative mechanisms for global carbon trading," Ecological Economics, Elsevier, vol. 53(1), pages 47-58, April.
    11. Lynne Y. Lewis, 2011. "A Virtual Field Trip to the Real World of Cap and Trade: Environmental Economics and the EPA SO 2 Allowance Auction," The Journal of Economic Education, Taylor & Francis Journals, vol. 42(4), pages 354-365, October.
    12. Scott E. Atkinson, 1983. "Marketable Pollution Permits and Acid Rain Externalities," Canadian Journal of Economics, Canadian Economics Association, vol. 16(4), pages 704-722, November.
    13. T. H. Tietenberg, 1978. "Spatially Differentiated Air Pollutant Emission Charges: An Economic and Legal Analysis," Land Economics, University of Wisconsin Press, vol. 54(3), pages 265-277.
    14. Atkinson, Scott & Tietenberg, Tom, 1991. "Market failure in incentive-based regulation: The case of emissions trading," Journal of Environmental Economics and Management, Elsevier, vol. 21(1), pages 17-31, July.
    15. Richard Schmalensee & Robert N Stavins, 2017. "The design of environmental markets: What have we learned from experience with cap and trade?," Oxford Review of Economic Policy, Oxford University Press and Oxford Review of Economic Policy Limited, vol. 33(4), pages 572-588.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Jiang, Ke & Wang, Die & Xu, Liping & Wang, Feng, 2024. "Assessing the impact of carbon quota allocation in enhancing supply chain members emission reduction and advertising efforts," Socio-Economic Planning Sciences, Elsevier, vol. 95(C).
    2. Zhang, Hao & Tao, Lunchen & Yang, Biyun & Bian, Wenlong, 2023. "The relationship between public participation in environmental governance and corporations’ environmental violations," Finance Research Letters, Elsevier, vol. 53(C).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Keith Willett & Anetta Caplanova & Rudolf Sivak, 2014. "Pricing mechanisms for cap and trade policies: computer-assisted smart markets for air quality," Journal of Environmental Planning and Management, Taylor & Francis Journals, vol. 57(8), pages 1240-1251, August.
    2. Cropper, Maureen L & Oates, Wallace E, 1992. "Environmental Economics: A Survey," Journal of Economic Literature, American Economic Association, vol. 30(2), pages 675-740, June.
    3. Hung, Ming-Feng & Shaw, Daigee, 2005. "A trading-ratio system for trading water pollution discharge permits," Journal of Environmental Economics and Management, Elsevier, vol. 49(1), pages 83-102, January.
    4. Keith Willett & Anetta Caplanova & Rudolf Sivak, 2015. "Emission discharge permits with regulatory tiering: Numerical simulations with a computer-assisted smart market," Journal of Environmental Economics and Policy, Taylor & Francis Journals, vol. 4(3), pages 259-277, November.
    5. Anetta Caplanova & Keith Willett, 2019. "Emission Discharge Permit Trading and Persistant Air Pollutants (A Common Pool Market Application with Health Risk Specifications)," International Advances in Economic Research, Springer;International Atlantic Economic Society, vol. 25(1), pages 19-38, February.
    6. Scott Duke Kominers & Alexander Teytelboym & Vincent P Crawford, 2017. "An invitation to market design," Oxford Review of Economic Policy, Oxford University Press and Oxford Review of Economic Policy Limited, vol. 33(4), pages 541-571.
    7. Stavins, Robert, 2001. "Lessons From the American Experiment With Market-Based Environmental Policies," RFF Working Paper Series dp-01-53, Resources for the Future.
    8. Chao-Ning Liao, 2009. "Technology adoption decisions under a mixed regulatory system of tradable permits and air pollution fees for the control of Total Suspended Particulates in Taiwan," Journal of Regulatory Economics, Springer, vol. 35(2), pages 135-153, April.
    9. Fowlie, Meredith & Perloff, Jeffrey M., 2004. "The Effect of Pollution Permit Allocations on Firm-Level Emissions," CUDARE Working Papers 25116, University of California, Berkeley, Department of Agricultural and Resource Economics.
    10. Roger Fouquet, 2012. "Economics of Energy and Climate Change: Origins, Developments and Growth," Working Papers 2012-08, BC3.
    11. Stavins, Robert, 2003. "Market-Based Environmental Policies: What Can We Learn from U.S. Experience and Related Research?," Working Paper Series rwp03-031, Harvard University, John F. Kennedy School of Government.
    12. Carlos Hervés‐Beloso & Francisco Martínez‐Concha & Emma Moreno‐García, 2024. "Economies with rights: Efficiency and inequality," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 26(1), February.
    13. Y. Ermoliev & M. Michalevich & A. Nentjes, 2000. "Markets for Tradeable Emission and Ambient Permits: A Dynamic Approach," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 15(1), pages 39-56, January.
    14. Vincent Bertrand, 2013. "Modeling of Emission Allowance Markets: A Literature Review," Working Papers 1304, Chaire Economie du climat.
    15. Schwartz Sonia, 2007. "Market Power Effects on Market Equilibrium in Ambient Permit Markets," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 7(1), pages 1-27, February.
    16. Schmidt, Klaus & Herweg, Fabian, 2021. "Prices versus Quantities with Morally Concerned Consumers," VfS Annual Conference 2021 (Virtual Conference): Climate Economics 242371, Verein für Socialpolitik / German Economic Association.
    17. Fernando Rodríguez, 1999. "Joint Implementation under the Second Sulfur Protocol: Analysis and Simulation," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 13(2), pages 143-168, March.
    18. Sovacool, Benjamin K., 2011. "The policy challenges of tradable credits: A critical review of eight markets," Energy Policy, Elsevier, vol. 39(2), pages 575-585, February.
    19. Ma-Lin Song & Wei Zhang & Xiao-Ming Qiu, 2015. "Emissions trading system and supporting policies under an emissions reduction framework," Annals of Operations Research, Springer, vol. 228(1), pages 125-134, May.
    20. Montero, Juan-Pablo, 1998. "Marketable pollution permits with uncertainty and transaction costs," Resource and Energy Economics, Elsevier, vol. 20(1), pages 27-50, March.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:soceps:v:82:y:2022:i:pb:s0038012122000507. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/seps .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.