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Intertemporal Permit Trading For Stock Pollutants With Uncertainty

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  • Tarui, Nori

Abstract

This paper explores the efficiency of tradable permit markets for stock pollutants. With uncertainty about the future stock level or damages, a market with banking and borrowing is inferior, in terms of efficiency, compared to a market without banking and borrowing if the regulator commits to an initial allocation of permits. This result occurs because, with banking and borrowing and commitment, the regulator needs to specify the total allowable amount of emission over time at the initial time period before the uncertainty with the pollution stock is resolved. An alternative banking and borrowing scheme is proposed, where the regulator can update the allocation of permits to firms over time and achieve the efficient pollution accumulation.

Suggested Citation

  • Tarui, Nori, 2002. "Intertemporal Permit Trading For Stock Pollutants With Uncertainty," Working Papers 14431, University of Minnesota, Center for International Food and Agricultural Policy.
    • Handle: RePEc:ags:umciwp:14431
    DOI: 10.22004/ag.econ.14431
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    References listed on IDEAS

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    2. Newell, Richard G. & Pizer, William A., 2003. "Regulating stock externalities under uncertainty," Journal of Environmental Economics and Management, Elsevier, vol. 45(2, Supple), pages 416-432, March.
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    More about this item

    Keywords

    Environmental Economics and Policy;

    JEL classification:

    • Q25 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Water

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