Emissions Trading: ERCs or Allowances?
Emissions trading takes place from two alternative baselines: 1) emission reduction credits (ERCs) in which the baseline is existing regulations which are often activity-based; or 2) cap-and-trade which specifies the total allowable emissions. This paper examines the effects of these two tradable permit systems on marginal and average costs for the firm, using electricity generation as an example. The ERC system subsidizes the activity level to which it is tied and fails to incorporate the full cost of external harm into the product price. If the permit limit is chosen ef- ficiently, the cap-and-trade system is more effi - cient.
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Michael Ari Prager & Thomas H. Klier & Richard H. Mattoon, 1996. "A mixed bag: assessment of market performance and firm trading behavior in the NOx RECLAIM program," Working Paper Series, Regional Economic Issues WP-96-12, Federal Reserve Bank of Chicago.
- Reinert, Kenneth A. & Ratick, Samuel J., 1988. "A note on estimating a long-run average cost curve for flue gas desulfurization," Journal of Environmental Economics and Management, Elsevier, vol. 15(1), pages 30-34, March.
- M. L. Weitzman, 1973.
"Prices vs. Quantities,"
106, Massachusetts Institute of Technology (MIT), Department of Economics.
- Thomas Klier & Richard Mattoon & Michael Prager, 1997. "A Mixed Bag: Assessmentof Market Performance and Firm Trading Behaviour in the NOx Reclaim Programme," Journal of Environmental Planning and Management, Taylor & Francis Journals, vol. 40(6), pages 751-774.
- Helfand, Gloria E, 1991. "Standards versus Standards: The Effects of Different Pollution Restrictions," American Economic Review, American Economic Association, vol. 81(3), pages 622-34, June.
- Joskow, Paul L & Schmalensee, Richard & Bailey, Elizabeth M, 1998. "The Market for Sulfur Dioxide Emissions," American Economic Review, American Economic Association, vol. 88(4), pages 669-85, September.
- Raymond S. Hartman & Kirkor Bozdogan & Ravindra M. Nadkarni, 1979. "The Economic Impacts of Environmental Regulations on the U.S. Copper Industry," Bell Journal of Economics, The RAND Corporation, vol. 10(2), pages 589-618, Autumn.
- Montgomery, W. David, 1972. "Markets in licenses and efficient pollution control programs," Journal of Economic Theory, Elsevier, vol. 5(3), pages 395-418, December.
- Thomas, Vinod, 1980. "Welfare cost of pollution control," Journal of Environmental Economics and Management, Elsevier, vol. 7(2), pages 90-102, June.
When requesting a correction, please mention this item's handle: RePEc:uwp:landec:v:77:y:2001:i:4:p:513-526. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ()
If references are entirely missing, you can add them using this form.