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

Listed author(s):
  • Betz, Regina

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.

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File URL: http://purl.umn.edu/174096
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Paper provided by Australian Agricultural and Resource Economics Society in its series 2006 Conference (50th), February 8-10, 2006, Sydney, Australia with number 174096.

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Date of creation: 2006
Handle: RePEc:ags:aare06:174096
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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. NeilJ. 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, 06.
  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;German National Library of Economics;Centre for European Policy Studies (CEPS), vol. 39(3), pages 121-123, May.
  6. 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.
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