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Third parties’ participation in tradable permits market. Do we need them?

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This paper analyses the behaviour, influence and role of third parties in tradable permits markets. Following the literature, it focuses on a framework in order to understand how society and third parties react against the firms’ emissions due to their participation in the tradable permits market. Therefore the paper reveals the tradable permits mechanism as a new way for public direct action and highlights the possible benefits for the regulator. An important part of the third parties consists of the very active participation of the Environmental Non-Governmental Organisations. Therefore, this paper argues that the third party’s participation and specifically the environmental groups’ participation in tradable permits market could drive the market to the optimum equilibrium. In order to examine this proposition we use some data from the first phase of the permits market in European Union and some available data for the environmental groups’ income. We conclude that the environmental groups could purchase the exceeded, over-allocated permits and could drive the market in the equilibrium point. Finally, for the regulator the environmental groups participation could be desirable given that they could improve the efficiency of the tradable permits market.

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  • T. Elias Asproudis & Tom Weyman Jones, 2011. "Third parties’ participation in tradable permits market. Do we need them?," Discussion Paper Series 2011_02, Department of Economics, Loughborough University, revised Sep 2011.
  • Handle: RePEc:lbo:lbowps:2011_02
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    File URL: http://www.lboro.ac.uk/departments/sbe/RePEc/lbo/lbowps/Third_parties'_participation_in_the_ETS.WP11-2.pdf
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