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Category Text Publication
Reference Category Reports
URL http://hdl.handle.net/10419/71063
Document publication document
Title (Primary) On the comparative advantage of tradable emission permits in a setting of uncertain abatement costs and market power – A case against the invariably pessimistic view
Author Heuson, C.
Source Titel UFZ Discussion Papers
Year 2013
Department OEKON
Volume 6/2013
Page To 25
Language englisch
Abstract Recent work has shown that Weitzman's policy rule for choosing price- versus quantity-based pollution control instruments under uncertainty is biased when the polluting firms possess market power (Heuson 2010). However, this study is restricted to emission standards and taxes, while tradable emission permits are ruled out since market power gives rise to strategic permit trading, which requires some separate effort in investigation. This paper aims at closing this gap and, in doing so, makes three main contributions. First, it provides the first-time full comparative analysis of the three most common pollution control instruments stated above which takes into account two features that are frequently given in actual regulation settings, namely market power of polluting firms and uncertain abatement costs from the regulator's perspective. Second, the paper reveals a new form of strategic permit trading that may arise even though the permit market is perfectly competitive. Finally, the rather pessimistic view concerning the impact of market power on the comparative advantage of tradable emission permits, which dominates in the literature so far, is put into context.
Persistent UFZ Identifier https://www.ufz.de/index.php?en=20939&ufzPublicationIdentifier=13775
Heuson, C. (2013):
On the comparative advantage of tradable emission permits in a setting of uncertain abatement costs and market power – A case against the invariably pessimistic view
UFZ Discussion Papers 6/2013
Helmholtz-Zentrum für Umweltforschung - UFZ, Leipzig, 25 pp.