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The role of abatement technologies for allocating free allowances

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  • Christin, Clémence
  • Nicolai, Jean-Philippe
  • Pouyet, Jerome

Abstract

The issue of how to allocate pollution permits is critical for the political sustainability of any cap-and-trade system. Under the objective of offsetting firms' losses resulting from the environmental regulation, we argue that the criteria for allocating free allowances must account for the type of abatement technology: industries that use process integrated technologies should receive some free allowances, whereas those using end-of-pipe abatement should not. In the long run, we analyze the interaction between the environmental policy and the evolution of the market structure. In particular, a reserve of pollution permits for new entrants may be justified when the industry uses a process integrated abatement technology.

Suggested Citation

  • Christin, Clémence & Nicolai, Jean-Philippe & Pouyet, Jerome, 2011. "The role of abatement technologies for allocating free allowances," DICE Discussion Papers 34, Heinrich Heine University Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).
    • Handle: RePEc:zbw:dicedp:34
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    Cited by:

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    2. Stühmeier Torben & Wenzel Tobias, 2012. "Regulating Advertising in the Presence of Public Service Broadcasting," Review of Network Economics, De Gruyter, vol. 11(2), pages 1-23, June.
    3. Woerdman Edwin & Nentjes Andries, 2019. "Emissions Trading Hybrids: The Case of the EU ETS," Review of Law & Economics, De Gruyter, vol. 15(1), pages 1-32, March.
    4. Clémence Christin, 2013. "Entry Deterrence Through Cooperative R&D Over-Investment," Recherches économiques de Louvain, De Boeck Université, vol. 79(2), pages 5-26.
    5. Xuemei Yuan & Shuai Jin & Haibin Zhang, 2023. "Optimal Green Technology Choice for Firms under an Emission Trading Scheme: End-of-Pipe vs. Cleaner Production," Sustainability, MDPI, vol. 15(23), pages 1-19, November.
    6. Haucap, Justus & Herr, Annika & Frank, Björn, 2011. "In vino veritas: Theory and evidence on social drinking," DICE Discussion Papers 37, Heinrich Heine University Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).

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    More about this item

    Keywords

    Cap-and-trade system; profit-neutral allocations; abatement technologies;
    All these keywords.

    JEL classification:

    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • Q53 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Air Pollution; Water Pollution; Noise; Hazardous Waste; Solid Waste; Recycling
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

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