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Emissions Permits Markets and Dominant Firms


  • Manel Antelo

    () (Departamento de Fundamentos da Análise Económica, Universidade de Santiago de Compostela)

  • Lluís Bru

    () (Departament d'Economia de l'Empresa, Universitat delles Illes Balears)


In this paper, the implementation of some schemes proposed in the literature for allocating emissions permits among pollutant firms, given a cap on total national emissions, is examined in the context of firms exerting market power in the (intermediate) emissions permits market. For that, we propose a partial equilibrium analysis with a government, consumers, and firms -one firm being a dominant firm with market power in the intermediate emissions permits market, and the rest of firms being competitive in such market. We find that the presence of a dominant firm in the intermediate emissions permits market generates an additional externality, and that a secondary market of emissions permits (in addition to a previous auction) does not solve such inefficiency. The context in which the dominant firm is "removed from the emissions permits market" by a (tax collector) government to obtain its permits through bilateral bargaining with the government rather than through the market is also explored.

Suggested Citation

  • Manel Antelo & Lluís Bru, 2004. "Emissions Permits Markets and Dominant Firms," Documentos de trabajo - Analise Economica 0031, IDEGA - Instituto Universitario de Estudios e Desenvolvemento de Galicia.
  • Handle: RePEc:edg:anecon:0031

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    References listed on IDEAS

    1. Blanchard, Olivier & Jimeno, Juan F, 1995. "Structural Unemployment: Spain versus Portugal," American Economic Review, American Economic Association, vol. 85(2), pages 212-218, May.
    2. Roberto Bande & Melchor Fernández & Victor Montuenga, 2001. "Disparidades regionales en la tasa de paro: El papel del mecanismo de determinación salarial," Documentos de trabajo - Analise Economica 0018, IDEGA - Instituto Universitario de Estudios e Desenvolvemento de Galicia.
    3. Roberto Bande, 2002. "Ajustes Dinámicos en las Tasas de Paro: España vs. Portugal," Documentos de trabajo - Analise Economica 0020, IDEGA - Instituto Universitario de Estudios e Desenvolvemento de Galicia.
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    More about this item


    emissions permits; market power; grandfathering; auction; bargaining;

    JEL classification:

    • Q2 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation
    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance


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