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Environmental markets exacerbate inequalities

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  • Ambec, Stefan

Abstract

Environmental markets distribute tradable rights on natural resources that are available for free on the earth such as water, biomass or clean air. In a framework where users differ solely in respect of their access to the resource, I investigate the allocation of rights that are accepted in the sense that, after trading, users obtain at least what they can achieve by sharing the resources they control. I show that, among all accepted rights, the more egalitarian ones do not allow any redistribution among users. Consequently, compared to an efficient allocation of resources, the net trading of rights always increases inequality.

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  • Ambec, Stefan, 2020. "Environmental markets exacerbate inequalities," TSE Working Papers 20-1120, Toulouse School of Economics (TSE).
    • Handle: RePEc:tse:wpaper:124416
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    References listed on IDEAS

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    1. Richard Schmalensee & Robert N. Stavins, 2017. "Lessons Learned from Three Decades of Experience with Cap and Trade," Review of Environmental Economics and Policy, Association of Environmental and Resource Economists, vol. 11(1), pages 59-79.
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    6. Richard Schmalensee & Robert N. Stavins, 2025. "Lessons Learned from Three Decades of Experience with Cap and Trade," World Scientific Book Chapters, in: Economics of Environment, Climate Change, and Wine Selected Papers of Robert N Stavins Volume 3 (2011–2023), chapter 9, pages 235-264, World Scientific Publishing Co. Pte. Ltd..
    7. Gary D. Libecap, 2009. "Chinatown Revisited: Owens Valley and Los Angeles--Bargaining Costs and Fairness Perceptions of the First Major Water Rights Exchange," The Journal of Law, Economics, and Organization, Oxford University Press, vol. 25(2), pages 311-338, October.
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    Keywords

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    JEL classification:

    • C71 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Cooperative Games
    • D02 - Microeconomics - - General - - - Institutions: Design, Formation, Operations, and Impact
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • Q28 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Government Policy
    • Q38 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Government Policy (includes OPEC Policy)
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

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