Permit Allocation in Emissions Trading using the Boltzmann Distribution
In emissions trading, the initial allocation of permits is an intractable issue because it needs to be essentially fair to the participating countries. There are many ways to distribute a given total amount of emissions permits among countries, but the existing distribution methods, such as auctioning and grandfathering, have been debated. In this paper we describe a new method for allocating permits in emissions trading using the Boltzmann distribution. We introduce the Boltzmann distribution to permit allocation by combining it with concepts in emissions trading. We then demonstrate through empirical data analysis how emissions permits can be allocated in practice among participating countries. The new allocation method using the Boltzmann distribution describes the most probable, natural, and unbiased distribution of emissions permits among multiple countries. Simple and versatile, this new method holds potential for many economic and environmental applications.
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Martin Shubik, 2000.
"The Theory of Money,"
Cowles Foundation Discussion Papers
1253, Cowles Foundation for Research in Economics, Yale University.
- Cramton, Peter & Kerr, Suzi, 2002.
"Tradeable carbon permit auctions: How and why to auction not grandfather,"
Elsevier, vol. 30(4), pages 333-345, March.
- Cramton, Peter & Kerr, Suzi, 1998. "Tradeable Carbon Permit Auctions: How and Why to Auction, Not Grandfather," Working Papers 197846, University of Maryland, Department of Agricultural and Resource Economics.
- Peter Cramton & Suzi Kerr, 2002. "Tradeable Carbon Permit Auctions: How and Why to Auction Not Grandfather," Papers of Peter Cramton 02eptc, University of Maryland, Department of Economics - Peter Cramton, revised 06 May 2002.
- Kerr, Suzi & Cramton, Peter, 1998. "Tradable Carbon Permit Auctions: How and Why to Auction Not Grandfather," Discussion Papers dp-98-34, Resources For the Future.
- Aldy, Joseph & Barrett, Scott & Stavins, Robert, 2003.
"Thirteen Plus One: A Comparison of Global Climate Policy Architectures,"
Working Paper Series
rwp03-012, Harvard University, John F. Kennedy School of Government.
- Joseph E. Aldy & Scott Barrett & Robert N. Stavins, 2003. "Thirteen plus one: a comparison of global climate policy architectures," Climate Policy, Taylor & Francis Journals, vol. 3(4), pages 373-397, December.
- Joseph E. Aldy & Scott Barrett & Robert N. Stavins, 2003. "Thirteen Plus One: A Comparison of Global Climate Policy Architectures," Working Papers 2003.64, Fondazione Eni Enrico Mattei.
- Invernizzi, Sergio & Medio, Alfredo, 1991. "On lags and chaos in economic dynamic models," Journal of Mathematical Economics, Elsevier, vol. 20(6), pages 521-550.
- Ferrero, Juan C, 2004. "The statistical distribution of money and the rate of money transference," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 341(C), pages 575-585.
- Victor M. Yakovenko & J. Barkley Rosser, 2009. "Colloquium: Statistical mechanics of money, wealth, and income," Papers 0905.1518, arXiv.org, revised Dec 2009.
- Springer, Urs, 2003. "The market for tradable GHG permits under the Kyoto Protocol: a survey of model studies," Energy Economics, Elsevier, vol. 25(5), pages 527-551, September.
- Stevens, Brandt & Rose, Adam, 2002. "A Dynamic Analysis of the Marketable Permits Approach to Global Warming Policy: A Comparison of Spatial and Temporal Flexibility," Journal of Environmental Economics and Management, Elsevier, vol. 44(1), pages 45-69, July.
- Nurmi, Hannu, 1996. "Fair division: From cake-cutting to dispute resolution : Steven J. Brams and Alan D. Taylor, (Cambridge University Press, Cambridge, 1995) pp. xiv + 272, US$ 54.95 (hardcover), US$ 18.95 (paper)," European Journal of Political Economy, Elsevier, vol. 12(1), pages 169-172, April.
- Barbanel, Julius B. & Brams, Steven J., 2004. "Cake division with minimal cuts: envy-free procedures for three persons, four persons, and beyond," Mathematical Social Sciences, Elsevier, vol. 48(3), pages 251-269, November.
- Chichilnisky, G. & Heal, G. & Starret, D., 1994. "International Emission Permits: Equity and Efficiency," Papers 94-03, Columbia - Graduate School of Business.
- Montgomery, W. David, 1972. "Markets in licenses and efficient pollution control programs," Journal of Economic Theory, Elsevier, vol. 5(3), pages 395-418, December.
- Theil, Henri & Fiebig, Denzil, 1981. "A maximum entropy approach to the specification of distributed lags," Economics Letters, Elsevier, vol. 7(4), pages 339-342.
- Adrian Dragulescu & Victor M. Yakovenko, 2000. "Statistical mechanics of money," Papers cond-mat/0001432, arXiv.org, revised Aug 2000.
- Milliman, Scott R. & Prince, Raymond, 1989. "Firm incentives to promote technological change in pollution control," Journal of Environmental Economics and Management, Elsevier, vol. 17(3), pages 247-265, November.
When requesting a correction, please mention this item's handle: RePEc:arx:papers:1108.2305. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (arXiv administrators)
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.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with 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 profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.