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Do Permit Allocations Matter?

Author

Listed:
  • Harrie A. A Verbon
  • Cees A. Withagen

Abstract

In the standard setting a system of tradable permits is effective and cost-efficient in attaining the policy objective of pollution reduction. This outcome is challenged in case of a tradable permit system in a federal system/constitution with individual states having discretionary power regarding environmental policy and where pollution is transboundary across states. This paper explores the opportunities of the central authority to influence the effectiveness and efficiency of the system, under various institutional arrangements, through the initial allocation of permits.

Suggested Citation

  • Harrie A. A Verbon & Cees A. Withagen, 2010. "Do Permit Allocations Matter?," CESifo Working Paper Series 3236, CESifo.
    • Handle: RePEc:ces:ceswps:_3236
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    File URL: https://www.cesifo.org/DocDL/cesifo1_wp3236.pdf
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    References listed on IDEAS

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    1. Santore, Rudy & Robison, H. David & Klein, Yehuda, 2001. "Strategic state-level environmental policy with asymmetric pollution spillovers," Journal of Public Economics, Elsevier, vol. 80(2), pages 199-224, May.
    2. Hikaru Ogawa & David E. Wildasin, 2009. "Think Locally, Act Locally: Spillovers, Spillbacks, and Efficient Decentralized Policymaking," American Economic Review, American Economic Association, vol. 99(4), pages 1206-1217, September.
    3. Robert W. Hahn, 1984. "Market Power and Transferable Property Rights," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 99(4), pages 753-765.
    4. Shiell, Leslie, 2003. "Equity and efficiency in international markets for pollution permits," Journal of Environmental Economics and Management, Elsevier, vol. 46(1), pages 38-51, July.
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    Cited by:

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    2. Thomas Eichner & Rüdiger Pethig, 2021. "Unilateral Phase-Out of Coal to Power in an Emissions Trading Scheme," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 80(2), pages 379-407, October.

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    More about this item

    Keywords

    tradable permits; fiscal federalism;

    JEL classification:

    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • Q00 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - General - - - General

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