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Regulated Firms in Pollution Permit Markets with Banking


  • Cronshaw, Mark B
  • Brown-Kruse, Jamie


This paper examines a competitive intertemporal market for bankable emission permits, such as sulfur dioxide allowances. Without profit regulation, firms are willing to bank permits if permit prices rise over time with the rate of interest, but will not bank if prices rise more slowly. The market achieves aggregate emission targets at least total cost if there is not profit regulation, but may not do so if firms are subject to profit regulation. Firms must arbitrage differences both in abatement cost and in the regulatory treatment of permits to achieve least total cost. Copyright 1996 by Kluwer Academic Publishers

Suggested Citation

  • Cronshaw, Mark B & Brown-Kruse, Jamie, 1996. "Regulated Firms in Pollution Permit Markets with Banking," Journal of Regulatory Economics, Springer, vol. 9(2), pages 179-189, March.
  • Handle: RePEc:kap:regeco:v:9:y:1996:i:2:p:179-89

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    References listed on IDEAS

    1. Kathleen Segerson, 1999. "Mandatory versus voluntary approaches to food safety," Agribusiness, John Wiley & Sons, Ltd., vol. 15(1), pages 53-70.
    2. Carl Shapiro, 1983. "Optimal Pricing of Experience Goods," Bell Journal of Economics, The RAND Corporation, vol. 14(2), pages 497-507, Autumn.
    3. Murray Fulton & Konstantinos Giannakas, 2004. "Inserting GM Products into the Food Chain: The Market and Welfare Effects of Different Labeling and Regulatory Regimes," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 86(1), pages 42-60.
    4. Winand Emons, 1997. "Credence Goods and Fraudelent Experts," RAND Journal of Economics, The RAND Corporation, vol. 28(1), pages 107-119, Spring.
    5. Paolo Garella & Emmanuel Petrakis, 2008. "Minimum quality standards and consumers’ information," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 36(2), pages 283-302, August.
    6. Crespi, John M. & Marette, Stephan, 2003. "Some Economic Implications Of Public Labeling," Journal of Food Distribution Research, Food Distribution Research Society, vol. 34(03), November.
    7. Gabszewicz, Jean J & Grilo, Isabel, 1992. "Price Competition When Consumers Are Uncertain about Which Firm Sells Which Quality," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 1(4), pages 629-650, Winter.
    8. Emons, Winand, 2001. "Credence goods monopolists," International Journal of Industrial Organization, Elsevier, vol. 19(3-4), pages 375-389, March.
    9. Marette, Stephan & Bureau, Jean-Christophe & Gozlan, Estelle, 2000. "Product Safety Provision and Consumers' Information," Australian Economic Papers, Wiley Blackwell, vol. 39(4), pages 426-441, December.
    10. Darby, Michael R & Karni, Edi, 1973. "Free Competition and the Optimal Amount of Fraud," Journal of Law and Economics, University of Chicago Press, vol. 16(1), pages 67-88, April.
    11. Segerson, Kathleen, 1998. "Mandatory vs. Voluntary Approaches to Food Safety," Research Reports 25188, University of Connecticut, Food Marketing Policy Center.
    12. John M. Crespi & St)phan Marette, 2001. "How Should Food Safety Certification be Financed?," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 83(4), pages 852-861.
    13. Brian Roe & Ian Sheldon, 2007. "Credence Good Labeling: The Efficiency and Distributional Implications of Several Policy Approaches," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 89(4), pages 1020-1033.
    14. Shaked, Avner & Sutton, John, 1983. "Natural Oligopolies," Econometrica, Econometric Society, vol. 51(5), pages 1469-1483, September.
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