Reference : The optimal size of a permit market
Scientific journals : Article
Business & economic sciences : Special economic topics (health, labor, transportation…)
http://hdl.handle.net/10993/11460
The optimal size of a permit market
English
Krysiak, Frank C. [Department of Business and Economics, University of Basel, Switzerland]
Schweitzer, Patrick mailto [University of Luxembourg > Interdisciplinary Centre for Security, Reliability and Trust (SNT) > > ; University of Luxembourg > Faculty of Science, Technology and Communication (FSTC) > Computer Science and Communications Research Unit (CSC)]
2010
Journal of Environmental Economics and Management [= JEEM]
Elsevier
60
2
133-143
Yes (verified by ORBilu)
International
0095-0696
1096-0449
Amsterdam
Netherlands
[en] Tradable permits ; Uncertainty ; Hot spot ; Spatial model ; Regulation ; Non-uniformly mixed pollutant ; Asymmetric information
[en] Regulating the emissions of non-uniformly mixed pollutants with a permit market carries the risk of hot spot formation, which can be reduced by dividing the regulation area into trading zones. The trading zone approach has been extensively discussed for the full-information case. We consider incomplete information concerning the emitters’ abatement costs, their locations, and pollution dispersion. We derive the optimal number of trading zones and the optimal number of permits per zone and analyze under which conditions a system of independent trading zones is superior to other policy measures. Our results show that appropriately sized permit markets are well-suited to regulating non-uniformly mixed pollutants under informational constraints if firms are not too heterogeneous. Only for substantial heterogeneity and a highly non-linear damage function can it be optimal to use command-and-control strategies.
http://hdl.handle.net/10993/11460
10.1016/j.jeem.2010.05.001
http://www.sciencedirect.com/science/article/B6WJ6-505F9DF-1/2/b9063d5e972b287ba3110cc746846f58

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