Buyer Liability and Voluntary Inspections in International Greenhouse Gas Emissions Trading: A Laboratory Study
This paper reports a preliminary laboratoryexperiment in which traders make investments toincrease the reliability of tradableinstruments that represent greenhouse gasemissions allowances. In one half of thesessions these investments are unobservable,while in the other half traders can invitecostless and accurate inspections that makereliability investments public. We implement abuyer liability rule, so that if emissionsreductions are unreliable (i.e., sellersdefault), the buyer of the allowances cannotredeem them to cover emissions. We find thatallowing inspections significantly increasesthe reliability investment rate and overallefficiency. Prices of uninspected allowancesusually trade at a substantial discount due tothe buyer liability rule, which provides astrong market incentive for sellers to investin reliability. Copyright Kluwer Academic Publishers 2003
Volume (Year): 25 (2003)
Issue (Month): 1 (May)
|Contact details of provider:|| Web page: http://www.springerlink.com/link.asp?id=100263|
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Morten Søberg, 2000. "Price Expectations and International Quota Trading: An Experimental Evaluation," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 17(3), pages 259-277, November.
- John Ledyard & Kristin Szakaly-Moore, 1993.
"Designing Organizations for Trading Pollution Rights,"
9307001, EconWPA, revised 28 Jul 1993.
- Ledyard, John O. & Szakaly-Moore, Kristin, 1994. "Designing organizations for trading pollution rights," Journal of Economic Behavior & Organization, Elsevier, vol. 25(2), pages 167-196, October.
- Ledyard, John O. & Szakaly, Kristin E., . "Designing Organizations for Trading Pollution Rights," Working Papers 838, California Institute of Technology, Division of the Humanities and Social Sciences.
- Cason, T.N. & Gangadharan, L., 1997.
"An Experimental Study of Electronic Bulletin Board Trading for Emission Permits,"
Department of Economics - Working Papers Series
592, The University of Melbourne.
- Cason, Timothy N & Gangadharan, Lata, 1998. "An Experimental Study of Electronic Bulletin Board Trading for Emission Permits," Journal of Regulatory Economics, Springer, vol. 14(1), pages 55-73, July.
- Franciosi Robert & Isaac R. Mark & Pingry David E. & Reynolds Stanley S., 1993. "An Experimental Investigation of the Hahn-Noll Revenue Neutral Auction for Emissions Licenses," Journal of Environmental Economics and Management, Elsevier, vol. 24(1), pages 1-24, January.
- Cason, Timothy N. & Gangadharan, Lata, 2002.
"Environmental Labeling and Incomplete Consumer Information in Laboratory Markets,"
Journal of Environmental Economics and Management,
Elsevier, vol. 43(1), pages 113-134, January.
- Cason, T.N. & Gangadharan, L., 1999. "Environmental Labeling and Incomplete Consumer Information in Laboratory Markets," Department of Economics - Working Papers Series 708, The University of Melbourne.
- Bohm, Peter & Carlen, Bjorn, 1999. "Emission quota trade among the few: laboratory evidence of joint implementation among committed countries," Resource and Energy Economics, Elsevier, vol. 21(1), pages 43-66, January.
- Cason, Timothy N. & Plott, Charles R., 1996. "EPA's New Emissions Trading Mechanism: A Laboratory Evaluation," Journal of Environmental Economics and Management, Elsevier, vol. 30(2), pages 133-160, March.
- Andrew Muller, R. & Mestelman, Stuart & Spraggon, John & Godby, Rob, 2002. "Can Double Auctions Control Monopoly and Monopsony Power in Emissions Trading Markets?," Journal of Environmental Economics and Management, Elsevier, vol. 44(1), pages 70-92, July.
- Stuart Mestelman & Andrew Muller, 1994.
"Emission Trading with Shares and Coupons : A Laboratory Experiment,"
McMaster Experimental Economics Laboratory Publications
1994-01, McMaster University.
- R. Andrew Muller & Stuart Mestelman, 1994. "Emission Trading with Shares and Coupons: A Laboratory Experiment," The Energy Journal, International Association for Energy Economics, vol. 0(Number 2), pages 185-211.
- Smith, Vernon L, 1982. "Microeconomic Systems as an Experimental Science," American Economic Review, American Economic Association, vol. 72(5), pages 923-55, December.
When requesting a correction, please mention this item's handle: RePEc:kap:enreec:v:25:y:2003:i:1:p:101-127. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Guenther Eichhorn)or (Christopher F. Baum)
If references are entirely missing, you can add them using this form.