Modeling of Emission Allowance Markets: A Literature Review
This paper reviews the development of emission trading models from the earliest to recent contributions. First, we introduce the economics of pollution control and the origins of emission trading. We give a brief description of policy instruments for the control of pollution, and explain why economic instruments (Pigouvian tax and emission trading) produce better results than “command-and-control” approaches. Second, we review several papers on modeling of emission trading systems, with a focus on dynamic models in case of perfect competition. We begin with the earliest static models, investigating a number of factor that can affect the effectiveness of emission trading (e.g. market power, transaction-costs, political pressures, etc). Next, we present dynamic models of permit markets, analysing questions such as banking/borrowing, relationship between spot and future markets, exogenous factors influencing the marginal abatement cost, etc. Finally, we end the paper with recent studies that model the main features of the European Emission Trading Scheme (EU ETS) in a dynamic framework with stochastic emissions.
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.:
- Juan-Pablo Montero, 2009.
"Market Power in Pollution Permit Markets,"
The Energy Journal,
International Association for Energy Economics, vol. 0(Special I).
- Juan-Pablo Montero, 2009. "Market Power in Pollution Permit Markets," Working Papers 0906, Massachusetts Institute of Technology, Center for Energy and Environmental Policy Research.
- Juan-Pablo Montero, 2009. "Market Power in Pollution Permit Markets," Documentos de Trabajo 355, Instituto de Economia. Pontificia Universidad Católica de Chile..
- repec:dau:papers:123456789/4611 is not listed on IDEAS
- repec:dau:papers:123456789/12955 is not listed on IDEAS
- Burton G. Malkiel, 2003. "The Efficient Market Hypothesis and Its Critics," Journal of Economic Perspectives, American Economic Association, vol. 17(1), pages 59-82, Winter.
- Cronshaw, Mark B & Brown-Kruse, Jamie, 1996. "Regulated Firms in Pollution Permit Markets with Banking," Journal of Regulatory Economics, Springer, vol. 9(2), pages 179-89, March.
- Stavins Robert N., 1995. "Transaction Costs and Tradeable Permits," Journal of Environmental Economics and Management, Elsevier, vol. 29(2), pages 133-148, September.
- Kling, Catherine L. & Rubin, Jonathan, 1997.
"Bankable Permits for the Control of Environmental Pollution,"
Staff General Research Papers
1479, Iowa State University, Department of Economics.
- Kling, Catherine & Rubin, Jonathan, 1997. "Bankable permits for the control of environmental pollution," Journal of Public Economics, Elsevier, vol. 64(1), pages 101-115, April.
- Beat Hintermann, 2009.
"Allowance Price Drivers in the First Phase of the EU ETS,"
CEPE Working paper series
09-63, CEPE Center for Energy Policy and Economics, ETH Zurich.
- Hintermann, Beat, 2010. "Allowance price drivers in the first phase of the EU ETS," Journal of Environmental Economics and Management, Elsevier, vol. 59(1), pages 43-56, January.
- Luca Taschini, 2010.
"Environmental economics and modeling marketable permits,"
GRI Working Papers
25, Grantham Research Institute on Climate Change and the Environment.
- Luca Taschini, 2010. "Environmental Economics and Modeling Marketable Permits," Asia-Pacific Financial Markets, Springer, vol. 17(4), pages 325-343, December.
- Luca Taschini, 2010. "Environmental economics and modeling marketable permits," LSE Research Online Documents on Economics 37596, London School of Economics and Political Science, LSE Library.
- Robert W. Hahn, 1984. "Market Power and Transferable Property Rights," The Quarterly Journal of Economics, Oxford University Press, vol. 99(4), pages 753-765.
- 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.
- Innes, Robert, 2003. "Stochastic pollution, costly sanctions, and optimality of emission permit banking," Journal of Environmental Economics and Management, Elsevier, vol. 45(3), pages 546-568, May.
- Scott E. Atkinson, 1983. "Marketable Pollution Permits and Acid Rain Externalities," Canadian Journal of Economics, Canadian Economics Association, vol. 16(4), pages 704-22, November.
- Schennach, Susanne M., 2000. "The Economics of Pollution Permit Banking in the Context of Title IV of the 1990 Clean Air Act Amendments," Journal of Environmental Economics and Management, Elsevier, vol. 40(3), pages 189-210, November.
- Seifert, Jan & Uhrig-Homburg, Marliese & Wagner, Michael, 2008. "Dynamic behavior of CO2 spot prices," Journal of Environmental Economics and Management, Elsevier, vol. 56(2), pages 180-194, September.
- Vincent Bertrand, 2012. "Understanding fuel switching under the EU ETS," International Journal of Global Energy Issues, Inderscience Enterprises Ltd, vol. 35(6), pages 494-517.
- Montgomery, W. David, 1972. "Markets in licenses and efficient pollution control programs," Journal of Economic Theory, Elsevier, vol. 5(3), pages 395-418, December.
- Rubin, Jonathan D., 1996. "A Model of Intertemporal Emission Trading, Banking, and Borrowing," Journal of Environmental Economics and Management, Elsevier, vol. 31(3), pages 269-286, November.
- Julien Chevallier, 2012. "Banking And Borrowing In The Eu Ets: A Review Of Economic Modelling, Current Provisions And Prospects For Future Design," Journal of Economic Surveys, Wiley Blackwell, vol. 26(1), pages 157-176, 02.
When requesting a correction, please mention this item's handle: RePEc:cec:wpaper:1304. 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: (Climate Economics Chair)
If references are entirely missing, you can add them using this form.