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Coasian rights in a cap-and-trade mechanism with damage compensations

Author

Listed:
  • Carlos Hervés-Beloso

    (Universidade de Vigo ECOBAS)

  • Francisco Martínez-Concha

    (Universidad de Chile, Instituto de Sistemas Complejos de Ingeniería)

Abstract

This paper revisits Coase’s ideas on property rights in a scenario where the law allows the establishment of mandatory limits - caps- to specific harmful effects of economic activity such as air pollution or traffic congestion. We propose a general equilibrium model with a cap-and-trade mechanism where agents suffering the harm share a portfolio of Coasian rights designed according to the caps. Equilibrium allocations must comply with the cap, reducing polluting emissions or switching from private to public transport. In addition, the monetary transfers that result from the sale of rights to polluters yield compensation to the harmed population, increasing the non-polluters income.

Suggested Citation

  • Carlos Hervés-Beloso & Francisco Martínez-Concha, 2023. "Coasian rights in a cap-and-trade mechanism with damage compensations," European Journal of Law and Economics, Springer, vol. 56(3), pages 425-441, December.
    • Handle: RePEc:kap:ejlwec:v:56:y:2023:i:3:d:10.1007_s10657-023-09788-3
    DOI: 10.1007/s10657-023-09788-3
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    References listed on IDEAS

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    More about this item

    Keywords

    Cap-and-trade; Coasian rights; General equilibrium; Negative externalities; Redistributive effects;
    All these keywords.

    JEL classification:

    • D51 - Microeconomics - - General Equilibrium and Disequilibrium - - - Exchange and Production Economies
    • D00 - Microeconomics - - General - - - General
    • D62 - Microeconomics - - Welfare Economics - - - Externalities

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