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Environmental markets exacerbate inequalities

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  • Stefan Ambec

    (TSE-R - Toulouse School of Economics - UT Capitole - Université Toulouse Capitole - UT - Université de Toulouse - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement)

Abstract

Environmental markets distribute tradable rights on natural resources that are available for free on the earth such as water, biomass or clean air. In a framework where users differ solely in respect of their access to the resource, I investigate the allocation of rights that are accepted in the sense that, after trading, users obtain at least what they can achieve by sharing the resources they control. I show that, among all accepted rights, the more egalitarian ones do not allow any redistribution among users. Consequently, compared to an efficient allocation of resources, the net trading of rights always increases inequality.

Suggested Citation

  • Stefan Ambec, 2020. "Environmental markets exacerbate inequalities," Working Papers hal-02945513, HAL.
    • Handle: RePEc:hal:wpaper:hal-02945513
    Note: View the original document on HAL open archive server: https://hal.inrae.fr/hal-02945513
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    References listed on IDEAS

    as
    1. Richard Schmalensee & Robert N. Stavins, 2017. "Lessons Learned from Three Decades of Experience with Cap and Trade," Review of Environmental Economics and Policy, Association of Environmental and Resource Economists, vol. 11(1), pages 59-79.
    2. Bochet, Olivier & İlkılıç, Rahmi & Moulin, Hervé, 2013. "Egalitarianism under earmark constraints," Journal of Economic Theory, Elsevier, vol. 148(2), pages 535-562.
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    5. R. Quentin Grafton & Gary Libecap & Samuel McGlennon & Clay Landry & Bob O'Brien, 2011. "An Integrated Assessment of Water Markets: A Cross-Country Comparison," Review of Environmental Economics and Policy, Association of Environmental and Resource Economists, vol. 5(2), pages 219-239, Summer.
    6. Anderson,Terry L. & Libecap,Gary D., 2014. "Environmental Markets," Cambridge Books, Cambridge University Press, number 9780521279659, September.
    7. van den Brink, René & van der Laan, Gerard & Moes, Nigel, 2012. "Fair agreements for sharing international rivers with multiple springs and externalities," Journal of Environmental Economics and Management, Elsevier, vol. 63(3), pages 388-403.
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    9. Gary D. Libecap, 2009. "Chinatown Revisited: Owens Valley and Los Angeles--Bargaining Costs and Fairness Perceptions of the First Major Water Rights Exchange," The Journal of Law, Economics, and Organization, Oxford University Press, vol. 25(2), pages 311-338, October.
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    More about this item

    Keywords

    Common-pool resources; Environmental externalities; Property rights; Cooperative game; Fairness; Tradable quotas; Emission permits;
    All these keywords.

    JEL classification:

    • C71 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Cooperative Games
    • D02 - Microeconomics - - General - - - Institutions: Design, Formation, Operations, and Impact
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • Q28 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Government Policy
    • Q38 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Government Policy (includes OPEC Policy)
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

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