IDEAS home Printed from https://ideas.repec.org/p/fem/femwpa/2009.118.html
   My bibliography  Save this paper

Price Floors for Emissions Trading

Author

Listed:
  • Peter John Wood

    (The Australian National University)

  • Frank Jotzo

    (The Australian National University)

Abstract

Price floors in greenhouse gas emissions trading schemes can have advantages for technological innovation, price volatility, and management of cost uncertainty, but implementation has potential pitfalls. We argue that the best mechanism for implementing a price floor is to have firms pay an extra fee or tax. This has budgetary advantages and is more compatible with international permit trading than alternative approaches that dominate the academic and policy debate. The fee approach can also be used to implement more general hybrid approaches to emissions pricing.

Suggested Citation

  • Peter John Wood & Frank Jotzo, 2009. "Price Floors for Emissions Trading," Working Papers 2009.118, Fondazione Eni Enrico Mattei.
  • Handle: RePEc:fem:femwpa:2009.118
    as

    Download full text from publisher

    File URL: http://www.feem.it/userfiles/attach/2010171714364118-09.pdf
    Download Restriction: no

    Other versions of this item:

    References listed on IDEAS

    as
    1. Philibert, Cedric, 2000. "How could emissions trading benefit developing countries," Energy Policy, Elsevier, vol. 28(13), pages 947-956, November.
    2. Martin L. Weitzman, 1974. "Prices vs. Quantities," Review of Economic Studies, Oxford University Press, vol. 41(4), pages 477-491.
    3. Pezzey, John C.V. & Mazouz, Salim & Jotzo, Frank, 2010. "The logic of collective action and Australia’s climate policy," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 54(2), June.
    4. Burtraw, Dallas & Palmer, Karen & Kahn, Danny, 2010. "A symmetric safety valve," Energy Policy, Elsevier, vol. 38(9), pages 4921-4932, September.
    5. Flavio Menezes & John Quiggin & Liam Wagner, 2009. "Grandfathering and Greenhouse: The Role of Compensation and Adjustment Assistance in the Introduction of a Carbon Emissions Trading Scheme for Australia," Economic Papers, The Economic Society of Australia, vol. 28(2), pages 82-92, June.
    6. Christina Hood, 2010. "Reviewing Existing and Proposed Emissions Trading Systems," IEA Energy Papers 2010/13, OECD Publishing.
    7. Frank Jotzo & Regina Betz, 2009. "Australia's emissions trading scheme: opportunities and obstacles for linking," Climate Policy, Taylor & Francis Journals, vol. 9(4), pages 402-414, July.
    8. Brian C. Murray & Richard G. Newell & William A. Pizer, 2009. "Balancing Cost and Emissions Certainty: An Allowance Reserve for Cap-and-Trade," Review of Environmental Economics and Policy, Association of Environmental and Resource Economists, vol. 3(1), pages 84-103, Winter.
    9. repec:reg:rpubli:59 is not listed on IDEAS
    10. Mustafa Babiker, John Reilly and Laurent Viguier, 2004. "Is International Emissions Trading Always Beneficial?," The Energy Journal, International Association for Energy Economics, vol. 0(Number 2), pages 33-56.
    11. Warwick McKibbin & Adele Morris & Peter Wilcoxen, 2009. "A Copenhagen Collar: Achieving Comparable Effort Through Carbon Price Agreements," CAMA Working Papers 2009-29, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
    12. Cameron Hepburn & Michael Grubb & Karsten Neuhoff & Felix Matthes & Maximilien Tse, 2006. "Auctioning of EU ETS phase II allowances: how and why?," Climate Policy, Taylor & Francis Journals, vol. 6(1), pages 137-160, January.
    13. Stavins, Robert N., 2003. "Experience with market-based environmental policy instruments," Handbook of Environmental Economics,in: K. G. Mäler & J. R. Vincent (ed.), Handbook of Environmental Economics, edition 1, volume 1, chapter 9, pages 355-435 Elsevier.
    14. Harrison Fell & Richard Morgenstern, 2010. "Alternative Approaches to Cost Containment in a Cap-and-Trade System," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 47(2), pages 275-297, October.
    15. Michael Grubb & Karsten Neuhoff, 2006. "Allocation and competitiveness in the EU emissions trading scheme: policy overview," Climate Policy, Taylor & Francis Journals, vol. 6(1), pages 7-30, January.
    16. Cameron Hepburn, 2006. "Regulation by Prices, Quantities, or Both: A Review of Instrument Choice," Oxford Review of Economic Policy, Oxford University Press, vol. 22(2), pages 226-247, Summer.
    17. Jacoby, Henry D. & Ellerman, A. Denny, 2004. "The safety valve and climate policy," Energy Policy, Elsevier, vol. 32(4), pages 481-491, March.
    18. Cédric Philibert, 2009. "Assessing the value of price caps and floors," Climate Policy, Taylor & Francis Journals, vol. 9(6), pages 612-633, November.
    19. Frank Krysiak, 2008. "Ex-post efficient permit markets: a detailed analysis," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 39(4), pages 397-410, April.
    20. Pizer, William A., 2002. "Combining price and quantity controls to mitigate global climate change," Journal of Public Economics, Elsevier, vol. 85(3), pages 409-434, September.
    21. Unold, Wolfram & Requate, Till, 2001. "Pollution control by options trading," Economics Letters, Elsevier, vol. 73(3), pages 353-358, December.
    22. Baranzini, Andrea & Goldemberg, Jose & Speck, Stefan, 2000. "A future for carbon taxes," Ecological Economics, Elsevier, vol. 32(3), pages 395-412, March.
    23. Warwick J. McKibbin & Peter J. Wilcoxen, 2002. "The Role of Economics in Climate Change Policy," Journal of Economic Perspectives, American Economic Association, vol. 16(2), pages 107-129, Spring.
    24. Sterner, Thomas & Turnheim, Bruno, 2009. "Innovation and diffusion of environmental technology: Industrial NOx abatement in Sweden under refunded emission payments," Ecological Economics, Elsevier, vol. 68(12), pages 2996-3006, October.
    25. Roberts, Marc J. & Spence, Michael, 1976. "Effluent charges and licenses under uncertainty," Journal of Public Economics, Elsevier, vol. 5(3-4), pages 193-208.
    26. Grafton, R Quentin & Devlin, Rose Anne, 1996. " Paying for Pollution: Permits and Charges," Scandinavian Journal of Economics, Wiley Blackwell, vol. 98(2), pages 275-288, June.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Price Floor; Price Ceiling; Carbon Tax; Emissions Trading; Carbon Pricing; Price and Quantity Controls; Waxman-Markey Bill;

    JEL classification:

    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:fem:femwpa:2009.118. 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: (barbara racah). General contact details of provider: http://edirc.repec.org/data/feemmit.html .

    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 CitEc recognized a reference but did not link an item in RePEc 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 RePEc Author Service 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.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.