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Tradable Disturbance Permits for Old-growth Forest Conservation: Experimental Evaluation of Implementation Options

Author

Listed:
  • Perger, Orsolya
  • Rollins, Curtis
  • Weber, Marian
  • Adamowicz, Wiktor
  • Boxall, Peter

Abstract

Experiments are used to examine the performance of tradable disturbance permits (TDPs) for meeting old-growth targets on public forest land. TDPs are an allowance-based cap-and-trade system for rights to disturb forest for development of timber and energy resources. Treatments compare three market institutions for permit allocation: second-price sealed-bid (SPSB) auction and grandfathering permits to the forest sector with a call or double-auction resale market. The large size of the forest sector creates opportunities for strategic interactions. Additional treatments include banking, uncertainty from forest fires, and adaptive caps. Grandfathering to the forest sector with a double-auction resale market outperformed the SPSB auction, alleviating concerns about market power. Without fire, banking had a negative effect on energy firms and total market surplus. Adaptive caps increased permits during low-fire seasons with a positive effect on surplus to energy firms and total market surplus.

Suggested Citation

  • Perger, Orsolya & Rollins, Curtis & Weber, Marian & Adamowicz, Wiktor & Boxall, Peter, 2017. "Tradable Disturbance Permits for Old-growth Forest Conservation: Experimental Evaluation of Implementation Options," Strategic Behavior and the Environment, now publishers, vol. 7(1-2), pages 73-107, December.
    • Handle: RePEc:now:jnlsbe:102.00000074
    DOI: 10.1561/102.00000074
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    Keywords

    Tradable permits; Biodiversity conservation; Market design;
    All these keywords.

    JEL classification:

    • D47 - Microeconomics - - Market Structure, Pricing, and Design - - - Market Design
    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior

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