Experimental comparison between markets on dynamic permit trading and investment in irreversible abatement with and without non-regulated companies

Taschini, Luca ORCID: 0000-0001-5355-1736, Chesney, Marc and Wang, Mei (2014) Experimental comparison between markets on dynamic permit trading and investment in irreversible abatement with and without non-regulated companies. Journal of Regulatory Economics, 46 (1). pp. 23-50. ISSN 0922-680X

Full text not available from this repository.

Abstract

This paper examines the investment strategies of compliance companies in irreversible abatement technologies and the environmental achievements of the system in an inter-temporal cap-and-trade market using laboratory experiments. The experimental analysis is performed under varying market structures: firstly, in a market that is exclusive to compliance companies and subsequently, in a market that is open to both compliance and non-compliance entities. In line with theoretical models on irreversible abatement investment, the paper shows that regulated companies trade permits at a premium. Also, steep per unit penalties for excess emissions prompt early investments in irreversible abatement technologies. Further, the paper shows that by contributing to the permit demand and supply, non-compliance companies (i) enhance the exchange of permits, helping the system to achieve a zero-excess permit position, (ii) increase the price levels, but has no apparent effect on price variability.

Item Type:	Article
Official URL:	http://link.springer.com/journal/11149
Additional Information:	© 2014 Springer
Divisions:	Grantham Research Institute
Subjects:	G Geography. Anthropology. Recreation > GE Environmental Sciences H Social Sciences > HB Economic Theory H Social Sciences > HG Finance
JEL classification:	C - Mathematical and Quantitative Methods > C0 - General > C02 - Mathematical Methods C - Mathematical and Quantitative Methods > C9 - Design of Experiments > C91 - Laboratory, Individual Behavior D - Microeconomics > D4 - Market Structure and Pricing > D40 - General Q - Agricultural and Natural Resource Economics; Environmental and Ecological Economics > Q5 - Environmental Economics > Q50 - General
Date Deposited:	10 Feb 2014 11:31
Last Modified:	25 Feb 2024 18:09
Funders:	Centre for Climate Change Economics and Policy, UK Economic and Social Research Council (ESRC), Munich Re
URI:	http://eprints.lse.ac.uk/id/eprint/55605

Actions (login required)

View Item