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Emissions trading to combat climate change: The impact of scheme design on transaction costs

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  • Betz, Regina

Abstract

This paper explores the likely impact of emissions trading design on transaction costs. Transaction costs include both the costs for the private sector to comply with the scheme rules and the costs of scheme administration. In economic theory transaction costs are often assumed to be zero. But transaction costs are real costs and there is no reason for treating them differently to other costs. Thus, in setting up an emissions trading scheme, transaction costs have to be taken into account in order to recommend a cost efficient design. In this paper, we compare transaction costs of different schemes such as the European Emissions Trading Scheme and the Clean Development Mechanism (CDM) to asses the hypothesis that cap and trade schemes have lower transaction costs than project-based mechanisms such as the CDM.

Suggested Citation

  • Betz, Regina, 2006. "Emissions trading to combat climate change: The impact of scheme design on transaction costs," 2006 Conference (50th), February 8-10, 2006, Sydney, Australia 174096, Australian Agricultural and Resource Economics Society.
    • Handle: RePEc:ags:aare06:174096
    DOI: 10.22004/ag.econ.174096
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    References listed on IDEAS

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    1. Krey, Matthias, 2004. "Transaction costs of CDM projects in India: An empirical survey," HWWA Reports 238, Hamburg Institute of International Economics (HWWA).
    2. Michaelowa, Axel & Jotzo, Frank, 2005. "Transaction costs, institutional rigidities and the size of the clean development mechanism," Energy Policy, Elsevier, vol. 33(4), pages 511-523, March.
    3. Neil J. Buckley & Stuart Mestelman & R. Andrew Muller, 2006. "Implications Of Alternative Emission Trading Plans: Experimental Evidence," Pacific Economic Review, Wiley Blackwell, vol. 11(2), pages 149-166, June.
    4. Cason, Timothy N & Gangadharan, Lata, 2003. "Transactions Costs in Tradable Permit Markets: An Experimental Study of Pollution Market Designs," Journal of Regulatory Economics, Springer, vol. 23(2), pages 145-165, March.
    5. Joachim Schleich & Regina Betz, 2004. "EU emissions trading and transaction costs for small and medium sized companies," Intereconomics: Review of European Economic Policy, Springer;ZBW - Leibniz Information Centre for Economics;Centre for European Policy Studies (CEPS), vol. 39(3), pages 121-123, May.
    6. Regina Betz & Wolfgang Eichhammer & Joachim Schleich, 2004. "Designing National Allocation Plans for Eu-Emissions Trading — A First Analysis of the Outcomes," Energy & Environment, , vol. 15(3), pages 375-425, July.
    7. Krey, Matthias, 2004. "Transaction Costs of CDM Projects in India - An Empirical Survey," Report Series 26112, Hamburg Institute of International Economics.
    8. Stronzik, Marcus & Hunt, Alistair & Eckermann, Frauke & Taylor, Tim, 2003. "The Role of Transaction Costs and Risk Premia in the Determination of Climate Change Policy Responses," ZEW Discussion Papers 03-59, ZEW - Leibniz Centre for European Economic Research.
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    Cited by:

    1. Pope, Jeff & Owen, Anthony D., 2009. "Emission trading schemes: potential revenue effects, compliance costs and overall tax policy issues," Energy Policy, Elsevier, vol. 37(11), pages 4595-4603, November.
    2. Ying Fan & Xu Wang, 2014. "Which Sectors Should Be Included in the Ets in the Context of a Unified Carbon Market in China?," Energy & Environment, , vol. 25(3-4), pages 613-634, April.
    3. Sanderson, Todd & Ancev, Tihomir & Betz, Regina, 2008. "Optimal Coverage of Installations in a Carbon Emissions Trading Scheme (ETS)," 2008 Conference (52nd), February 5-8, 2008, Canberra, Australia 6047, Australian Agricultural and Resource Economics Society.
    4. Andrea Kollmann & Friedrich Schneider, 2010. "Why Does Environmental Policy in Representative Democracies Tend to Be Inadequate? A Preliminary Public Choice Analysis," Sustainability, MDPI, vol. 2(12), pages 1-25, November.
    5. Jūratė Jaraitė & Frank Convery & Corrado Di Maria, 2010. "Transaction costs for firms in the EU ETS: lessons from Ireland," Climate Policy, Taylor & Francis Journals, vol. 10(2), pages 190-215, March.
    6. Xianbing Liu & Sunhee Suk & Kinichi Sudo, 2012. "GHG emissions trading schemes in Northeast Asia: an overview and analysis of current scenarios," Chapters, in: Larry Kreiser & Ana Yábar Sterling & Pedro Herrera & Janet E. Milne & Hope Ashiabor (ed.), Carbon Pricing, Growth and the Environment, chapter 10, pages 149-166, Edward Elgar Publishing.

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