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Personal emission permit trading scheme: urban spatial equilibrium and planning

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  • Yao Li

    (Hefei University of Technology)

  • Shuai Wang

    (Hefei University of Technology)

Abstract

This paper studies the effect of personal emission permit trading scheme as a policy to limit greenhouse gas emissions from commuting and housing. First, urban spatial equilibrium is established under personal emission permit trading scheme which incorporates the interaction between residents’ location choice and emission permit market. For a given emission permit scheme, residents’ residential location choices and housing market structure in terms of housing rental price and space can be endogenously determined and the permit price is governed by the permit market equilibrium. On this basis, we prove its equivalence with the first-best planning model and propose the social welfare maximization planning model to determine the total amount of permits issued and the endogenous permit price. Model properties and income redistribution effect are numerically illustrated. Further, the pareto-improving scheme is numerically explored in terms of residents’ utility improvement and emission reduction. The study helps show the effectiveness and efficiency of the personal emission permit trading scheme and planning on the urban system in terms of emissions reduction, social welfare and residents’ utility.

Suggested Citation

  • Yao Li & Shuai Wang, 2023. "Personal emission permit trading scheme: urban spatial equilibrium and planning," Natural Hazards: Journal of the International Society for the Prevention and Mitigation of Natural Hazards, Springer;International Society for the Prevention and Mitigation of Natural Hazards, vol. 116(1), pages 1239-1259, March.
    • Handle: RePEc:spr:nathaz:v:116:y:2023:i:1:d:10.1007_s11069-022-05719-8
    DOI: 10.1007/s11069-022-05719-8
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