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Enforcing Emissions Trading when Emissions Permits are Bankable

  • John Stranlund

    ()

  • Christopher Costello

    ()

  • Carlos Chávez

    ()

We propose enforcement strategies for emissions trading programs with bankable emissions permits that guarantee complete compliance with minimal enforcement costs. Our strategies emphasize imperfect monitoring supported by a high unit penalty for reporting violations, and tying this penalty directly to equilibrium permit prices. This approach is quite different from several existing enforcement strategies that emphasize high unit penalties for emissions in excess of permit holdings. Our analysis suggests that a high penalty for excess emissions cannot be used to conserve monitoring effort, and that it may actually increase the amount of monitoring necessary to maintain compliance. Copyright Springer Science+Business Media, Inc. 2005

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File URL: http://hdl.handle.net/10.1007/s11149-005-3108-6
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Article provided by Springer in its journal Journal of Regulatory Economics.

Volume (Year): 28 (2005)
Issue (Month): 2 (09)
Pages: 181-204

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Handle: RePEc:kap:regeco:v:28:y:2005:i:2:p:181-204
Contact details of provider: Web page: http://www.springerlink.com/link.asp?id=100298

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  1. Ellerman, A.D. & Juan-Pablo Montero, 2002. "The Temporal Efficiency of SO2 Emissions Trading," Cambridge Working Papers in Economics 0231, Faculty of Economics, University of Cambridge.
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