IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this paper or follow this series

A differential game of intertemporal emissions trading with market power

  • Julien Pierre Chevallier

In international emissions trading schemes such as the Kyoto Protocol and the European Union Emissions Trading Scheme, the suboptimal negotiation of the cap with respect to total pollution minimization leads us to critically examine the proposition that generous allocation of grandfathered permits by the regulator based on recent emissions might pave the way for dominant positions. Stemming from this politically given market imperfection, this paper develops a differential Stackelberg game with two types of noncooperative agents: a large potentially dominant agent and a competitive fringe whose size are exogenously determined. The strategic interactions are modelled on an intra-industry permits markets where agents can freely bank and borrow permits. This paper contributes to the debate on initial permits allocation and market power by focusing on the effects of allowing banking and borrowing. A documented appraisal on whether or not such provisions should be included is frequently overlooked by the debate to introduce the permits market itself among other environmental regulation tools. Results are presented under perfect information.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://economix.fr/pdf/dt/2007/WP_EcoX_2007-18.pdf
Download Restriction: no

Paper provided by University of Paris West - Nanterre la Défense, EconomiX in its series EconomiX Working Papers with number 2007-18.

as
in new window

Length: 27 pages
Date of creation: 2007
Date of revision:
Handle: RePEc:drm:wpaper:2007-18
Contact details of provider: Postal: 200 Avenue de la République, Bât. G - 92001 Nanterre Cedex
Web page: http://economix.fr
Email:


More information through EDIRC

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.:

as in new window
  1. 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.
  2. Gernot Klepper & Sonja Peterson, 2002. "Trading Hot Air The Influence of Permit Allocation Rules, Market Power and the US Withdrawal from the Kyoto Protocol," Kiel Working Papers 1133, Kiel Institute for the World Economy.
  3. Pierre-André Jouvet & Philippe Michel & Gilles Rotillon, 2004. "Optimal growth with pollution : how to use pollution permits ?," Cahiers de la Maison des Sciences Economiques v04012, Université Panthéon-Sorbonne (Paris 1).
  4. Eftichios Sartzetakis, 1997. "Tradeable emission permits regulations in the presence of imperfectly competitive product markets: Welfare implications," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 9(1), pages 65-81, January.
  5. Richard Newell & William Pizer & Jiangfeng Zhang, 2005. "Managing Permit Markets to Stabilize Prices," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 31(2), pages 133-157, 06.
  6. Olivier Godard, 2003. "L'allocation initiale des quotas d'émission de C02 aux entreprises à la lumière de l'analyse économique," Working Papers hal-00242986, HAL.
  7. Charles Kolstad, 2005. "Piercing the Veil of Uncertainty in Transboundary Pollution Agreements," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 31(1), pages 21-34, 05.
  8. Matti Liski & Juan-Pablo Montero, 2005. "Market power in a storable-good market - Theory and applications to carbon and sulfur trading," Working Papers 0516, Massachusetts Institute of Technology, Center for Energy and Environmental Policy Research.
  9. Olivier Godard, 2005. "Politique de l'effet de serre. Une évaluation du plan français de quotas de CO2," Revue Française d'Économie, Programme National Persée, vol. 19(4), pages 147-186.
  10. Matti Liski & Juan-Pablo Montero, 2006. "On Pollution Permit Banking and Market Power," Journal of Regulatory Economics, Springer, vol. 29(3), pages 283-302, 05.
  11. Petrakis, Emmanuel & Xepapadeas, Anastasios, 2003. "Location decisions of a polluting firm and the time consistency of environmental policy," Resource and Energy Economics, Elsevier, vol. 25(2), pages 197-214, May.
  12. Dieter Helm & Cameron Hepburn & Richard Mash, 2003. "Credible Carbon Policy," Oxford Review of Economic Policy, Oxford University Press, vol. 19(3), pages 438-450.
  13. Grubb, M. & Neuhoff, K., 2006. "Allocation and competitiveness in the EU emissions trading scheme: policy overview," Cambridge Working Papers in Economics 0645, Faculty of Economics, University of Cambridge.
  14. Paul Leiby & Jonathan Rubin, 2001. "Intertemporal Permit Trading for the Control of Greenhouse Gas Emissions," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 19(3), pages 229-256, July.
  15. Misiolek, Walter S. & Elder, Harold W., 1989. "Exclusionary manipulation of markets for pollution rights," Journal of Environmental Economics and Management, Elsevier, vol. 16(2), pages 156-166, March.
  16. 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.
  17. Eftichios Sartzetakis, 2004. "On the Efficiency of Competitive Markets for Emission Permits," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 27(1), pages 1-19, January.
  18. 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.
  19. Hahn, Robert W., 1982. "Market Power and Transferable Property Rights," Working Papers 402, California Institute of Technology, Division of the Humanities and Social Sciences.
  20. Maeda, Akira, 2003. "The Emergence of Market Power in Emission Rights Markets: The Role of Initial Permit Distribution," Journal of Regulatory Economics, Springer, vol. 24(3), pages 293-314, November.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:drm:wpaper:2007-18. 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: (Valérie Mignon)

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.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.