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Adverse Selection and Emissions Offsets

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  • Bushnell, James

Abstract

Programs where firms sell emissions ``offsets'' to reduce their emissions continue to provide important complementsto traditional environmental regulations. However in many cases, particularly with current and prospective climate change policy, they continue to be very controversial. The problem of adverse selection lies at the heart of this controversy, as critics of offset programs continue to produce evidence that these projects are paying firms for actions they would have undertaken anyway, and are not producing ``additional'' reductions. This paper explores the theoretical sources of non-additional offsets. An important distinction arises between sales that indicate adverse selection and those that reveal information about aggregate emissions levels.

Suggested Citation

  • Bushnell, James, 2011. "Adverse Selection and Emissions Offsets," Staff General Research Papers Archive 32736, Iowa State University, Department of Economics.
  • Handle: RePEc:isu:genres:32736
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    File URL: http://www2.econ.iastate.edu/papers/p12736-2011-04-06.pdf
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    Cited by:

    1. Knut Rosendahl & Jon Strand, 2015. "Emissions Trading with Offset Markets and Free Quota Allocations," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 61(2), pages 243-271, June.
    2. repec:wsi:ccexxx:v:03:y:2012:i:04:n:s2010007812500236 is not listed on IDEAS
    3. repec:kap:enreec:v:69:y:2018:i:1:d:10.1007_s10640-016-0072-9 is not listed on IDEAS

    More about this item

    Keywords

    adverse selection; Emissions Markets; Offsets; Climate Policy;

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • Q50 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - General

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