Emissions Trading and Profit-Neutral Grandfathering
This paper examines the amount of grandfathering needed for an emissions trading scheme (ETS) to have a neutral impact on firm profits. We provide a simple formula to calculate profit-neutral grandfathering in a Cournot model with firms of different sizes and a general demand function. Using this formula, we obtain estimates of profit-neutral grandfathering for the electricity, cement, newsprint and steel industries. Under the current EU ETS, firms obtain close to full grandfathering; we show that while this may still leave some firms worse off, others have probably benefitted substantially. We find no evidence that any industry as a whole could be worse off with full grandfathering. We also show that the common presumption that a higher rate of cost pass-through lowers profit-neutral grandfathering is unreliable
|Date of creation:||01 Dec 2006|
|Date of revision:|
|Contact details of provider:|| Postal: Manor Rd. Building, Oxford, OX1 3UQ|
Web page: http://www.economics.ox.ac.uk/
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.:
- Xavier Freixas & Roger Guesnerie & Jean Tirole, 1985. "Planning under Incomplete Information and the Ratchet Effect," Review of Economic Studies, Oxford University Press, vol. 52(2), pages 173-191.
- Seade, Jesus K, 1980. "On the Effects of Entry," Econometrica, Econometric Society, vol. 48(2), pages 479-89, March.
- Szabo, Laszlo & Hidalgo, Ignacio & Ciscar, Juan Carlos & Soria, Antonio, 2006. "CO2 emission trading within the European Union and Annex B countries: the cement industry case," Energy Policy, Elsevier, vol. 34(1), pages 72-87, January.
- Massimo Filippini, 1999. "Swiss residential demand for electricity," Applied Economics Letters, Taylor & Francis Journals, vol. 6(8), pages 533-538.
- Lars-Hendrik Röller & Frode Steen, 2006. "On the Workings of a Cartel: Evidence from the Norwegian Cement Industry," American Economic Review, American Economic Association, vol. 96(1), pages 321-338, March.
- Richard A. Lord & W. Ken Farr, 2003. "Collusion and Financial Leverage: An Analysis of the Integrated Mill Steel Industry," Financial Management, Financial Management Association, vol. 32(1), Spring.
- Kimmel, Sheldon, 1992. "Effects of Cost Changes on Oligopolists' Profits," Journal of Industrial Economics, Wiley Blackwell, vol. 40(4), pages 441-49, December.
- Herman Vollebergh & Jan Vries & Paul Koutstaal, 1997. "Hybrid carbon incentive mechanisms and political acceptability," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 9(1), pages 43-63, January.
- M. L. Chas-Amil & J. Buongiorno, 2000. "The demand for paper and paperboard: econometric models for the European Union," Applied Economics, Taylor & Francis Journals, vol. 32(8), pages 987-999.
- Don Fullerton & Gilbert E. Metcalf, 2002.
NBER Working Papers
8829, National Bureau of Economic Research, Inc.
- Don Fullerton & Gilbert E. Metcalf, 2001. "Tax Incidence," Discussion Papers Series, Department of Economics, Tufts University 0106, Department of Economics, Tufts University.
- Gilbert E. Metcalf, 2006. "Tax Incidence," Discussion Papers Series, Department of Economics, Tufts University 0607, Department of Economics, Tufts University.
- Maddala, G S, et al, 1997. "Estimation of Short-Run and Long-Run Elasticities of Energy Demand from Panel Data Using Shrinkage Estimators," Journal of Business & Economic Statistics, American Statistical Association, vol. 15(1), pages 90-100, January.
- Lisbeth la Cour & H. Møllgaard, 2002. "Market Domination: Tests Applied to the Danish Cement Industry," European Journal of Law and Economics, Springer, vol. 14(2), pages 99-127, September.
- Jans, Ivette & Rosenbaum, David I., 1997. "Multimarket contact and pricing: Evidence from the U.S. cement industry," International Journal of Industrial Organization, Elsevier, vol. 15(3), pages 391-412, May.
When requesting a correction, please mention this item's handle: RePEc:oxf:wpaper:295. 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: (Monica Birds)
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.