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Market Power in a System of Tradeable CO2, Quotas

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  • Hege Westskog

Abstract

This paper examines the connection between market power and the size of efficiency loss in a market for tradeable CO2 permits. Countries, not firms, are the players in the market. A situation is analyzed where some of the, participants have market power, i.e., they can influence the price of a CO2 quota. Each country with market power decides how many quotas to buy or sell, given the other market power countries' sales or purchases of quotas, and the behavior of countries without market power. The latter countries act as price takers. The market equilibrium is compared to a cost effective market situation in order to quantify the efficiency loss resulting from market power.

Suggested Citation

  • Hege Westskog, 1996. "Market Power in a System of Tradeable CO2, Quotas," The Energy Journal, , vol. 17(3), pages 85-103, July.
    • Handle: RePEc:sae:enejou:v:17:y:1996:i:3:p:85-103
    DOI: 10.5547/ISSN0195-6574-EJ-Vol17-No3-6
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    References listed on IDEAS

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    1. Michael Hoel, 1991. "Efficient International Agreements for Reducing Emissions of CO2," The Energy Journal, International Association for Energy Economics, vol. 0(Number 2), pages 93-108.
    2. Peter Bohm & Bjorn Larsen, 1994. "Fairness in a tradeable-permit treaty for carbon emissions reductions in Europe and the former Soviet Union," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 4(3), pages 219-239, June.
    3. Rolf Golombek & Jan Braten, 1994. "Incomplete International Climate Agreements: Optimal Carbon Taxes, Market Failures and Welfare Effects," The Energy Journal, , vol. 15(4), pages 141-165, October.
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