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What Have We Learned From Emissions Trading Experiments?

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  • Stuart Mestelman
  • Andrew Muller

Abstract

Emissions trading is a form of environmental regulation in which a regulatory body specifies the total allowable discharge of pollutants, divides this cap into individual permits assigned to individual polluters, and allows trading of the resulting permits. Laboratory experiments, in which paid subjects participate in controlled markets, can be used to test both proposals for emission trading and the theories on which they are based. This paper surveys the laboratory research that has investigated the efficiency of emission trading programs, role of alternative instruments and institutions, the effects of allowing firms to carry inventories of permits, and the extent to which market power can be exercised.

Suggested Citation

  • Stuart Mestelman & Andrew Muller, 1997. "What Have We Learned From Emissions Trading Experiments?," McMaster Experimental Economics Laboratory Publications 1997-03, McMaster University.
    • Handle: RePEc:mcm:mceelp:1997-03
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    References listed on IDEAS

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    1. Ledyard, John O. & Szakaly-Moore, Kristin, 1994. "Designing organizations for trading pollution rights," Journal of Economic Behavior & Organization, Elsevier, vol. 25(2), pages 167-196, October.
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    6. Cason Timothy N., 1993. "Seller Incentive Properties of EPA's Emission Trading Auction," Journal of Environmental Economics and Management, Elsevier, vol. 25(2), pages 177-195, September.
    7. Godby, Robert W. & Mestelman, Stuart & Muller, R. Andrew & Welland, J. Douglas, 1997. "Emissions Trading with Shares and Coupons when Control over Discharges Is Uncertain," Journal of Environmental Economics and Management, Elsevier, vol. 32(3), pages 359-381, March.
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