Allocating Tradable Permits on the Basis of Market Price to Achieve Cost Effectiveness |
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| Authors: | Cathrine Hagem Hege Westskog |
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| Institution: | (1) Research Department, Statistics Norway, P.O. Box 8131, Dep, N-0033 Oslo, Norway;(2) Center for International Climate and Environmental Research, CICERO, P.O. Box 1129, Blindern, 0318 Oslo, Norway |
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| Abstract: | It is a well known result that distributional constraints can lead to an imperfectly competitive permit market where the emission
target is no longer met at least cost. In this paper, we suggest an allocation rule for tradable permits which can handle
this problem. If the permit allocation is dependent on the market price for permits, this allocation rule can achieve both
cost effectiveness and meet specific requirements for cost distribution across agents. |
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| Keywords: | Climate change Emission permits Allocation Cost effectiveness Distributional constraints |
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