IDEAS home Printed from https://ideas.repec.org/p/mse/wpsorb/v04074.html
   My bibliography  Save this paper

«Hot Air» and Market Power in International Emission Trading

Author

Listed:
  • Florent Pratlong

    (ERASME et EUREQua)

  • Denise Van Regemorter

    (CES - Katholieke Universiteit Leuven)

  • Paul Zagamé

    (ERASME et EUREQua)

Abstract

In respect to GHG emission reduction targets set in the Kyoto Protocol in 1997, an emission quotas trading system will be implemented among the Annex-1 participating countries to lower the mitigation costs of the international cooperation on climate change issue. Nonetheless, in the way the market was designed, the States of the Former Soviet Union and Eastern Europe are likely to become large sellers of carbon as a result of the drop in emissions level due to economic downturn, referring to «Hot Air». Indeed, these countries may exert substantially a dominant position in the international permits market since the US had decided to withdraw from the Kyoto Protocol. This paper aims to develop a better understanding of the consequence of «Hot Air» in the international carbon emission trading, using some policy variants simulated with the computable general equilibrium GEM-E3 World model. The present analyse focuses particularly on the measures of «Hot Air» and the implications of potential market power in the emission trading market. Under various scenario options, the exercise of market power lead to a misallocation of abatement effort across the remaining Annex-1 countries as a consequence of permits price and welfare effects

Suggested Citation

  • Florent Pratlong & Denise Van Regemorter & Paul Zagamé, 2004. "«Hot Air» and Market Power in International Emission Trading," Cahiers de la Maison des Sciences Economiques v04074, Université Panthéon-Sorbonne (Paris 1).
    • Handle: RePEc:mse:wpsorb:v04074
    as

    Download full text from publisher

    File URL: ftp://mse.univ-paris1.fr/pub/mse/cahiers2004/V04074.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Robert W. Hahn, 1984. "Market Power and Transferable Property Rights," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 99(4), pages 753-765.
    2. Johan Eyckmans & Denise Van Regemorter & Vincent van Steenberghe, 2001. "Is Kyoto fatally flawed? An analysis with MacGEM," Energy, Transport and Environment Working Papers Series ete0118, KU Leuven, Department of Economics - Research Group Energy, Transport and Environment.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Andreas Löschel & Zhong Zhang, 2002. "The economic and environmental implications of the US repudiation of the kyoto protocol and the subsequent deals in Bonn and Marrakech," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 138(4), pages 711-746, December.
    2. Böhringer, Christoph & Dijkstra, Bouwe & Rosendahl, Knut Einar, 2014. "Sectoral and regional expansion of emissions trading," Resource and Energy Economics, Elsevier, vol. 37(C), pages 201-225.
    3. Godal, Odd & Klaassen, Ger, 2006. "Carbon trading across sources and periods constrained by the Marrakesh Accords," Journal of Environmental Economics and Management, Elsevier, vol. 51(3), pages 308-322, May.
    4. Olivier Guyader, 2002. "Simulating the Effect of Regulatory Systems in a Fishery, An Application to the French Driftnet Albacore Fleet," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 23(1), pages 1-28, September.
    5. Bonacina, Monica & Gulli`, Francesco, 2007. "Electricity pricing under "carbon emissions trading": A dominant firm with competitive fringe model," Energy Policy, Elsevier, vol. 35(8), pages 4200-4220, August.
    6. Barbara Buchner & Carlo Carraro, 2004. "Economic and environmental effectiveness of a technology-based climate protocol," Climate Policy, Taylor & Francis Journals, vol. 4(3), pages 229-248, September.
    7. Johan Eyckmans & Cathrine Hagem, 2009. "The European Union's Potential for Strategic Emissions Trading through Minimal Permit Sale Contracts," CESifo Working Paper Series 2809, CESifo.
    8. John Duggan & Joanne Roberts, 2002. "Implementing the Efficient Allocation of Pollution," American Economic Review, American Economic Association, vol. 92(4), pages 1070-1078, September.
    9. Figueroa, Nicolás & Serrano, Carlos J., 2019. "Patent trading flows of small and large firms," Research Policy, Elsevier, vol. 48(7), pages 1601-1616.
    10. Stavins, Robert, 2004. "Environmental Economics," RFF Working Paper Series dp-04-54, Resources for the Future.
    11. Murphy, James J. & Stranlund, John K., 2007. "A laboratory investigation of compliance behavior under tradable emissions rights: Implications for targeted enforcement," Journal of Environmental Economics and Management, Elsevier, vol. 53(2), pages 196-212, March.
    12. Yates, Andrew J. & Doyle, Martin W. & Rigby, J.R. & Schnier, Kurt E., 2013. "Market power, private information, and the optimal scale of pollution permit markets with application to North Carolina's Neuse River," Resource and Energy Economics, Elsevier, vol. 35(3), pages 256-276.
    13. Fischer, Carolyn, 2011. "Market power and output-based refunding of environmental policy revenues," Resource and Energy Economics, Elsevier, vol. 33(1), pages 212-230, January.
    14. Beat Hintermann, 2011. "Market Power, Permit Allocation and Efficiency in Emission Permit Markets," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 49(3), pages 327-349, July.
    15. Fowlie, Meredith & Perloff, Jeffrey M., 2004. "The Effect of Pollution Permit Allocations on Firm-Level Emissions," CUDARE Working Papers 25116, University of California, Berkeley, Department of Agricultural and Resource Economics.
    16. Lewis, Tracy R. & Sappington, David E. M., 1995. "Using markets to allocate pollution permits and other scarce resource rights under limited information," Journal of Public Economics, Elsevier, vol. 57(3), pages 431-455, July.
    17. Sartzetakis, Eftichios S., 1994. "Permis d’émission négociables et réglementation dans des marchés de concurrence imparfaite," L'Actualité Economique, Société Canadienne de Science Economique, vol. 70(2), pages 139-158, juin.
    18. Hanley Nick & MacKenzie Ian A, 2010. "The Effects of Rent Seeking over Tradable Pollution Permits," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 10(1), pages 1-26, July.
    19. Bodo Sturm & Joachim Weimann, 2006. "Experiments in Environmental Economics and Some Close Relatives," Journal of Economic Surveys, Wiley Blackwell, vol. 20(3), pages 419-457, July.
    20. Maogang Tang & Silu Cheng & Wenqing Guo & Weibiao Ma & Fengxia Hu, 2023. "Relationship between carbon emission trading schemes and companies’ total factor productivity: evidence from listed companies in China," Environment, Development and Sustainability: A Multidisciplinary Approach to the Theory and Practice of Sustainable Development, Springer, vol. 25(10), pages 11735-11767, October.

    More about this item

    Keywords

    Emission trading; market power; MECG;
    All these keywords.

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • D58 - Microeconomics - - General Equilibrium and Disequilibrium - - - Computable and Other Applied General Equilibrium Models
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:mse:wpsorb:v04074. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Lucie Label (email available below). General contact details of provider: https://edirc.repec.org/data/msep1fr.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.