Emissions Trading with Profit-Neutral Permit Allocations
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Authors
Hepburn, Cameron J.
Quah, John K.-H.
Ritz, Robert
Abstract
This paper examines the impact of an emissions trading scheme (ETS) on equilibrium emissions, output, price, market concentration, and profits in a generalized Cournot model. We develop formulae for the number of emissions permits that have to be freely allocated to firms to neutralize the profit impact of the ETS. We show that its profit impact is usually limited
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Keywords
Cap-and-trade, permit allocation, profit-neutrality, cost pass-through, abatement, grandfathering
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Faculty of Economics