Emissions trading to combat climate change: The impact of scheme design on transaction costs
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.
|Date of creation:||2006|
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- NeilJ. Buckley & Stuart Mestelman & R.Andrew Muller, 2006.
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- 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 - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
- Krey, Matthias, 2004. "Transaction costs of CDM projects in India: An empirical survey," HWWA Reports 238, Hamburg Institute of International Economics (HWWA).
- 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.
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