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Price Floors for Emissions Trading

  • Wood, Peter John
  • Jotzo, Frank

Price floors in greenhouse gas emissions trading schemes can have advantages for technological innovation, price volatility, and management of cost uncertainty. Implementing the schemes, however, has pitfalls. This research report argues that requiring firms to pay an extra fee or tax is the best way to put a price floor in place. As well as providing budgetary advantages, the fee approach is more compatible with international permit trading than the alternative approaches currently dominating academic and policy debate. The fee approach can also be used for other emissions pricing schemes.

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Paper provided by Australian National University, Environmental Economics Research Hub in its series Research Reports with number 94885.

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Date of creation: Oct 2009
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Handle: RePEc:ags:eerhrr:94885
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  1. Cameron Hepburn & Michael Grubb & Karsten Neuhoff & Felix Matthes & Maximilien Tse, 2006. "Auctioning of EU ETS phase II allowances: how and why?," Climate Policy, Taylor & Francis Journals, vol. 6(1), pages 137-160, January.
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  7. Brian C. Murray & Richard G. Newell & William A. Pizer, 2008. "Balancing Cost and Emissions Certainty: An Allowance Reserve for Cap-and-Trade," NBER Working Papers 14258, National Bureau of Economic Research, Inc.
  8. Menezes, Flavio & Quiggin, John & Wagner, Liam, 2008. "Grandfathering and greenhouse: the role of compensation and adjustment assistance in the introduction of a carbon emissions trading scheme for Australia," Risk and Sustainable Management Group Working Papers 152094, University of Queensland, School of Economics.
  9. Stavins, Robert, 2001. "Experience with Market-Based Environmental Policy Instruments," Discussion Papers dp-01-58, Resources For the Future.
  10. Frank Jotzo & Regina Betz, 2009. "Australia's emissions trading scheme: opportunities and obstacles for linking," Climate Policy, Taylor & Francis Journals, vol. 9(4), pages 402-414, July.
  11. C�Dric Philibert, 2009. "Assessing the value of price caps and floors," Climate Policy, Taylor & Francis Journals, vol. 9(6), pages 612-633, November.
  12. Grafton, R Quentin & Devlin, Rose Anne, 1996. " Paying for Pollution: Permits and Charges," Scandinavian Journal of Economics, Wiley Blackwell, vol. 98(2), pages 275-88, June.
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  17. Philibert, Cedric, 2000. "How could emissions trading benefit developing countries," Energy Policy, Elsevier, vol. 28(13), pages 947-956, November.
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  20. Frank Krysiak, 2008. "Ex-post efficient permit markets: a detailed analysis," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 39(4), pages 397-410, April.
  21. Warwick J. McKibbin & Peter J. Wilcoxen, 2002. "The Role of Economics in Climate Change Policy," Journal of Economic Perspectives, American Economic Association, vol. 16(2), pages 107-129, Spring.
  22. Mustafa Babiker, John Reilly and Laurent Viguier, 2004. "Is International Emissions Trading Always Beneficial?," The Energy Journal, International Association for Energy Economics, vol. 0(Number 2), pages 33-56.
  23. Pizer, William A., 2002. "Combining price and quantity controls to mitigate global climate change," Journal of Public Economics, Elsevier, vol. 85(3), pages 409-434, September.
  24. Cameron Hepburn, 2006. "Regulation by Prices, Quantities, or Both: A Review of Instrument Choice," Oxford Review of Economic Policy, Oxford University Press, vol. 22(2), pages 226-247, Summer.
  25. Christina Hood, 2010. "Reviewing Existing and Proposed Emissions Trading Systems," IEA Energy Papers 2010/13, OECD Publishing.
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