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Markets for Tradeable Emission and Ambient Permits: A Dynamic Approach

Author

Listed:
  • Y. Ermoliev
  • M. Michalevich
  • A. Nentjes

Abstract

This paper discusses trade mechanisms in pollutionpermit markets. Proofs are given, that sequential,bilateral trade in tradeable emissions permitsconverges to a market equilibrium with minimal totalcosts of pollution control. If ambient or depositionpermits are traded, the convergence of bilateraltransactions occurs only in the case of a singlereceptor. For multiple receptors, the proof ofconvergence for tradeable emissions and ambientpermits is given for two trade mechanisms: sequential,multilateral trade and a Walrasian auction. Copyright Kluwer Academic Publishers 2000

Suggested Citation

  • 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.
  • Handle: RePEc:kap:enreec:v:15:y:2000:i:1:p:39-56
    DOI: 10.1023/A:1008369611378
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    References listed on IDEAS

    as
    1. Krupnick, Alan J. & Oates, Wallace E. & Van De Verg, Eric, 1983. "On marketable air-pollution permits: The case for a system of pollution offsets," Journal of Environmental Economics and Management, Elsevier, vol. 10(3), pages 233-247, September.
    2. Ermoliev, Yuri & Klaassen, Ger & Nentjes, Andries, 1996. "Adaptive Cost-Effective Ambient Charges under Incomplete Information," Journal of Environmental Economics and Management, Elsevier, vol. 31(1), pages 37-48, July.
    3. Montgomery, W. David, 1972. "Markets in licenses and efficient pollution control programs," Journal of Economic Theory, Elsevier, vol. 5(3), pages 395-418, December.
    4. Stavins, Robert, 2004. "Environmental Economics," Discussion Papers dp-04-54, Resources For the Future.
    5. Hahn, Robert W., 1986. "Trade-offs in designing markets with multiple objectives," Journal of Environmental Economics and Management, Elsevier, vol. 13(1), pages 1-12, March.
    6. 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.
    7. 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.
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    Citations

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    Cited by:

    1. Pickl, Matthias & Wirl, Franz, 2011. "Auction design for gas pipeline transportation capacity--The case of Nabucco and its open season," Energy Policy, Elsevier, vol. 39(4), pages 2143-2151, April.
    2. der Straeten, Bart Van & Buysse, Jeroen & Nolte, Stephan & Lauwers, Ludwig & Claeys, Dakerlia & Van Huylenbroeck, Guido, 2011. "Markets of concentration permits: The case of manure policy," Ecological Economics, Elsevier, vol. 70(11), pages 2098-2104, September.
    3. 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.
    4. 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.
    5. Boemare, Catherine & Quirion, Philippe, 2002. "Implementing greenhouse gas trading in Europe: lessons from economic literature and international experiences," Ecological Economics, Elsevier, vol. 43(2-3), pages 213-230, December.
    6. Smith, Craig M. & Peterson, Jeffrey M. & Leatherman, John C. & Williams, Jeffery R., 2012. "A Simulation of Factors Impeding Water Quality Trading," Journal of Regional Analysis and Policy, Mid-Continent Regional Science Association, vol. 42(2).
    7. Liao, Chao-Ning, 2007. "Modelling a mixed system of air pollution fee and tradable permits for controlling nitrogen oxide: a case study of Taiwan," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 51(4), December.
    8. Flåm, S.D. & Godal, O., 2008. "Market clearing and price formation," Journal of Economic Dynamics and Control, Elsevier, vol. 32(3), pages 956-977, March.
    9. Jaroslaw Stanczak, 2009. "Application of an evolutionary algorithmto simulation of the co2 emission permits marketwith purchase prices," Operations Research and Decisions, Wroclaw University of Technology, Institute of Organization and Management, vol. 4, pages 94-108.
    10. Nielsen, Rasmus, 2012. "Introducing individual transferable quotas on nitrogen in Danish fresh water aquaculture: Production and profitability gains," Ecological Economics, Elsevier, vol. 75(C), pages 83-90.
    11. Van der Straeten, Bart & Buysse, Jeroen & Nolte, Stephan & Lauwers, Ludwig H. & Claeys, Dakerlia & Van Huylenbroeck, Guido, 2011. "Policy intervention in a concentration permit market: efficiency analysis of obligatory manure processing in Flanders," 2011 International Congress, August 30-September 2, 2011, Zurich, Switzerland 114832, European Association of Agricultural Economists.
    12. Chung, Sung H. & Weaver, Robert D. & Friesz, Terry L., 2012. "Oligopolies in pollution permit markets: A dynamic game approach," International Journal of Production Economics, Elsevier, vol. 140(1), pages 48-56.
    13. Flåm, S. D. & Ermoliev, Y. M., 2009. "Investment, uncertainty, and production games," Environment and Development Economics, Cambridge University Press, vol. 14(01), pages 51-66, February.
    14. Piotr Nowak & Maciej Romaniuk, 2009. "Applying fuzzy parameters in pricing financial derivatives inspired by Kyoto Protocol," Operations Research and Decisions, Wroclaw University of Technology, Institute of Organization and Management, vol. 4, pages 77-91.
    15. Peterson, Jeffrey M. & Smith, Craig M. & Valentin, Luc, 2005. "A Water Quality Trading Simulation for Northeast Kansas," 2005 Annual meeting, July 24-27, Providence, RI 19167, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    16. R. Prabodanie & John Raffensperger & Mark Milke, 2010. "A Pollution Offset System for Trading Non-Point Source Water Pollution Permits," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 45(4), pages 499-515, April.
    17. T. Ermolieva & Y. Ermoliev & M. Jonas & M. Obersteiner & F. Wagner & W. Winiwarter, 2014. "Uncertainty, cost-effectiveness and environmental safety of robust carbon trading: integrated approach," Climatic Change, Springer, vol. 124(3), pages 633-646, June.
    18. Bristow, Abigail L. & Wardman, Mark & Zanni, Alberto M. & Chintakayala, Phani K., 2010. "Public acceptability of personal carbon trading and carbon tax," Ecological Economics, Elsevier, vol. 69(9), pages 1824-1837, July.
    19. Odd Godal & Yuri Ermoliev & Ger Klaassen & Michael Obersteiner, 2003. "Carbon Trading with Imperfectly Observable Emissions," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 25(2), pages 151-169, June.
    20. 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.
    21. Zbigniew Nahorski & Jarosław Stańczak & Piotr Pałka, 2014. "Simulation of an uncertain emission market for greenhouse gases using agent-based methods," Climatic Change, Springer, vol. 124(3), pages 647-662, June.
    22. Jaroslaw Stanczak, 2009. "Application of an evolutionary algorithm to simulation of the CO2 emission permits market with purchase prices," Operations Research and Decisions, Wroclaw University of Technology, Institute of Organization and Management, vol. 4, pages 93-108.
    23. 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.
    24. repec:wut:journl:v:4:y:2009:p:94-108:id:148 is not listed on IDEAS
    25. Valcu, Adriana Mihaela, 2013. "Agricultural nonpoint source pollution and water quality trading: empirical analysis under imperfect cost information and measurement error," ISU General Staff Papers 201301010800004451, Iowa State University, Department of Economics.

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