Balancing Cost and Emissions Certainty: An Allowance Reserve for Cap-and-Trade
On efficiency grounds, the economics community has to date tended to emphasize price-based policies to address climate change -- such as taxes or a “safety-valve” price ceiling for cap-and-trade -— while environmental advocates have sought a more clear quantitative limit on emissions. This paper presents a simple modification to the idea of a safety valve -- a quantitative limit that we call the allowance reserve. Importantly, this idea may bridge the gap between competing interests and potentially improve efficiency relative to tax or other price-based policies. The last point highlights the deficiencies in several previous studies of price and quantity controls for climate change that do not adequately capture the dynamic opportunities within a cap-and-trade system for allowance banking, borrowing, and intertemporal arbitrage in response to unfolding information.
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.:
- Kling, Catherine & Rubin, Jonathan, 1997.
"Bankable permits for the control of environmental pollution,"
Journal of Public Economics,
Elsevier, vol. 64(1), pages 101-115, April.
- Kling, Catherine L. & Rubin, Jonathan, 1997. "Bankable Permits for the Control of Environmental Pollution," Staff General Research Papers 1479, Iowa State University, Department of Economics.
- Pizer, William & Newell, Richard & Zhang, Jiangfeng, 2003.
"Managing Permit Markets to Stabilize Prices,"
dp-03-34, Resources For the Future.
- Rubin, Jonathan D., 1996. "A Model of Intertemporal Emission Trading, Banking, and Borrowing," Journal of Environmental Economics and Management, Elsevier, vol. 31(3), pages 269-286, November.
- Kerr, Suzi & Newell, Richard, 2001.
"Policy-Induced Technology Adoption: Evidence from the U.S. Lead Phasedown,"
dp-01-14, Resources For the Future.
- Suzi Kerr & Richard G. Newell, 2003. "Policy-Induced Technology Adoption: Evidence from the U.S. Lead Phasedown," Journal of Industrial Economics, Wiley Blackwell, vol. 51(3), pages 317-343, 09.
- 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.
- Tatsutani, Marika & Pizer, William A., 2008. "Managing Costs in a U.S. Greenhouse Gas Trading Program: A Workshop Summary," Discussion Papers dp-08-23, Resources For the Future.
- Martin L. Weitzman, 1974.
"Prices vs. Quantities,"
Review of Economic Studies,
Oxford University Press, vol. 41(4), pages 477-491.
- Hoel, Michael & Karp, Larry, 2002.
"Taxes versus quotas for a stock pollutant,"
Resource and Energy Economics,
Elsevier, vol. 24(4), pages 367-384, November.
- Hoel, Michael & Karp, Larry, 2001. "Taxes versus Quotas for a Stock Pollutant," Department of Agricultural & Resource Economics, UC Berkeley, Working Paper Series qt5fx9p7kf, Department of Agricultural & Resource Economics, UC Berkeley.
- Pizer, William & Newell, Richard, 1998.
"Regulating Stock Externalities Under Uncertainty,"
dp-99-10-rev, Resources For the Future.
- Kolstad, Charles D., 1996. "Learning and Stock Effects in Environmental Regulation: The Case of Greenhouse Gas Emissions," Journal of Environmental Economics and Management, Elsevier, vol. 31(1), pages 1-18, July.
- Mitchel Y. Abolafia (ed.), 2005. "Markets," Books, Edward Elgar Publishing, number 2788.
- Roberts, Marc J. & Spence, Michael, 1976. "Effluent charges and licenses under uncertainty," Journal of Public Economics, Elsevier, vol. 5(3-4), pages 193-208.
- Unold, Wolfram & Requate, Till, 2001. "Pollution control by options trading," Economics Letters, Elsevier, vol. 73(3), pages 353-358, December.
When requesting a correction, please mention this item's handle: RePEc:rff:dpaper:dp-08-24. 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: (Webmaster)
If references are entirely missing, you can add them using this form.