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Should Consumers Be Priced Out of Pollution-Permit Markets?

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  • Stefani C. Smith
  • Andrew J. Yates

Abstract

The authors present a simple diagrammatic exposition of a pollution-permit market in which both firms that generate pollution and consumers who are harmed by pollution are allowed to purchase permits at a single market price. They show that the market equilibrium is efficient if and only if the endowment of permits is equal to the efficient level of pollution. Furthermore, if consumers actually participate in the market, then the equilibrium is not efficient. Welfare can be improved by decreasing the endowment of permits and thereby pricing consumers out of the market.

Suggested Citation

  • Stefani C. Smith & Andrew J. Yates, 2003. "Should Consumers Be Priced Out of Pollution-Permit Markets?," The Journal of Economic Education, Taylor & Francis Journals, vol. 34(2), pages 181-189, January.
    • Handle: RePEc:taf:jeduce:v:34:y:2003:i:2:p:181-189
    DOI: 10.1080/00220480309595211
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    Citations

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    Cited by:

    1. Debra Israel, 2007. "Environmental participation in the U.S. sulfur allowance auctions," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 38(3), pages 373-390, November.
    2. Antoine Mandel, 2007. "Welfare improvement properties of an allowance market in a production economy," Post-Print halshs-00155803, HAL.
    3. Asproudis, Elias & Weyman-Jones, Tom, 2011. "Third parties �participation in tradable permits market. Do we need them?," MPRA Paper 28766, University Library of Munich, Germany.
    4. Elias Asproudis & Thomas Weyman-Jones, 2020. "How the ENGOs Can Fight the Industrial/Business Lobby with Their Tools from Their Own Field? ENGOs Participation in Emissions Trading Market," Sustainability, MDPI, vol. 12(20), pages 1-13, October.
    5. Olivier ROUSSE, 2008. "Should the regulator allow citizens to participate in tradable permits markets?," Cahiers du CREDEN (CREDEN Working Papers) 08.03.75, CREDEN (Centre de Recherche en Economie et Droit de l'Energie), Faculty of Economics, University of Montpellier 1.

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