IDEAS home Printed from https://ideas.repec.org/h/spr/sprchp/978-3-7908-1748-5_7.html
   My bibliography  Save this book chapter

Optimal strategies for emissions trading in a Putty-Clay Vintage Model

In: Emissions Trading and Business

Author

Listed:
  • Peter Letmathe

    (University of Siegen)

  • Sandra Wagner

    (University of Siegen)

Abstract

In December 2002, the European Union decided to set up a carbon dioxide trading system to meet the goals of the Kyoto protocol. The trading system applies to energy producing companies and to firms with high energy usage. Firms will obtain the allowance to emit a given amount of carbon dioxide which will be reduced step by step on a yearly basis. The firms will have to buy additional allowances if the given amount does not satisfy their actual needs and they can sell allowances if they have excess allowances. In order to improve their market position, companies may invest in technical progress leading to fewer emissions. The article examines which strategy companies should choose to adjust optimally to the trading system. The theoretical background builds Solow’s hypothesis that technical progress is embodied in capital goods which leads to different production functions in each period (Vintage Production Functions). In combination with the Putty-Clay Model, it is shown that technical progress rates, timing of investment and prices of allowances play an important role in defining the optimal strategy of firms in order to cope with emissions trading.

Suggested Citation

  • Peter Letmathe & Sandra Wagner, 2006. "Optimal strategies for emissions trading in a Putty-Clay Vintage Model," Springer Books, in: Ralf Antes & Bernd Hansjürgens & Peter Letmathe (ed.), Emissions Trading and Business, pages 91-103, Springer.
    • Handle: RePEc:spr:sprchp:978-3-7908-1748-5_7
    DOI: 10.1007/3-7908-1748-1_7
    as

    Download full text from publisher

    To our knowledge, this item is not available for download. To find whether it is available, there are three options:
    1. Check below whether another version of this item is available online.
    2. Check on the provider's web page whether it is in fact available.
    3. Perform a search for a similarly titled item that would be available.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:spr:sprchp:978-3-7908-1748-5_7. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.