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Frictions in Project-Based Supply of Permits

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  • Matti Liski
  • Juha Virrankoski

Abstract

Emissions trading in climate change can entail large overall cost savings and transfers between developed and developing countries. However, the search for acceptable JI or CDM projects implies a deviation from the perfect market framework used in previous estimations. Our model combines the search market for projects with a frictionless permit market to quantify the supply-side frictions in the CO 2 market. We also decompose the effects of frictions into the effects of search friction, bargaining, and bilateralism. A calibration using previous cost estimates of CO 2 reductions illustrate changes in cost savings and allocative implications. Copyright Kluwer Academic Publishers 2004

Suggested Citation

  • Matti Liski & Juha Virrankoski, 2004. "Frictions in Project-Based Supply of Permits," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 28(3), pages 347-365, July.
    • Handle: RePEc:kap:enreec:v:28:y:2004:i:3:p:347-365
    DOI: 10.1023/B:EARE.0000031060.86739.28
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    Cited by:

    1. Jon Strand, 2019. "Combining Carbon Taxation and Offset Payments: A New Approach to Climate Policy in Low-Income Countries," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 74(3), pages 949-960, November.
    2. Satoru Kasahara & Sergey Paltsev & John Reilly & Henry Jacoby & A. Ellerman, 2007. "Climate Change Taxes and Energy Efficiency in Japan," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 37(2), pages 377-410, June.
    3. Giovanni Bella, 2009. "A Search Model for Joint Implementation," Working Papers 2009.80, Fondazione Eni Enrico Mattei.

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