Designing markets for emission permits with applications to climate change
(2003)
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- Authors
- Supervisors
- Tulkens, Henry
- Abstract
- (en) The tradable permits instrument has recently received increased attention from authorities in charge of limiting the emissions of various pollutants. This interest is growing considerably, particularly in Europe, since the signing of the Kyoto Protocol (December 1997) which allows for the trading of rights to emit greenhouse gases. This doctoral dissertation investigates the tradable emission permits instrument by studying the impact of some of its key design features which have not been analyzed until now. From our theoretical and empirical analyses, we derive the following three main policy-oriented results. First, the presence of intermediaries (market makers) on the market for permits has an impact on trades and on the total number of permits to be allocated by the environmental agency. Consequently, the expected microstructure of markets for emission permits must be taken into account when designing such a system. This proves to be particularly important under non-competitive microstructures and under incomplete information on the polluters technology, features which are very likely to characterize the introduction of a program. Second, in the context of climate change, treaties among nations must be signed on a voluntary basis since no supranational authority is able to impose such international agreements. Therefore, no country or group of countries should be worse off under a world tradable permit system limiting emissions of greenhouse gas than under a non cooperative situation, i.e. the agreement needs to be individually or coalitionally rational. We find that, even when such a realistic requirement is taken into account, long term allocations of greenhouse gases emission permits may to some extent be driven by equity principles. Third, the Kyoto Protocol allows countries to carry over unused permits from one commitment period to the next. Such a banking provision has a crucial impact on the price of the permits during the Kyoto commitment period (2008-2012). Moreover, it leads to substantial cost savings, provided post-Kyoto commitments are negotiated early
- Affiliations
Citations
van Steenberghe, V. (2003). Designing markets for emission permits with applications to climate change. https://hdl.handle.net/2078.5/48734