Emissions Trading with Profit-Neutral Permit Allocations
Hepburn, Cameron J.
Quah, John K.-H.
Ritz, Robert A.
Faculty of Economics
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Hepburn, C. J., Quah, J. K., & Ritz, R. A. (2012). Emissions Trading with Profit-Neutral Permit Allocations. http://www.econ.cam.ac.uk/dae/repec/cam/pdf/cwpe1235.pdf
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
Cap-and-trade, permit allocation, profit-neutrality, cost pass-through, abatement, grandfathering
External link: http://www.econ.cam.ac.uk/dae/repec/cam/pdf/cwpe1235.pdf