ALTERNATIVE INTERTEMPROAL PERMIT TRADING REGIMES WITH STOCHASTIC ABATEMENT COSTS

We examine the social efficiency of alternative intertemporal permit trading regimes. Banking with a 1-to-1 ratio and with a non-unitary intertemporal trading ratio (ITR) are compared with each other and with the no-banking permit trading regime. The more industry-wide shocks vary, and/or the more they are negatively correlated across time, the more efficient is a bankable permit regime. When the slope of the benefit function is greater than the slope of the damage function, banking with ITR=1+r is more efficient than a no-banking regime. Banking with ITR=1 can be more efficient than a no-banking regime. However, whether ITR=1 or ITR=1+r is better depends on the covariance structure of the shocks and the benefit and damage functions.


Issue Date:
2002
Publication Type:
Working or Discussion Paper
Record Identifier:
http://ageconsearch.umn.edu/record/18543
PURL Identifier:
http://purl.umn.edu/18543
Total Pages:
27
Series Statement:
CARD Working Paper 02-WP 318




 Record created 2017-04-01, last modified 2018-01-22

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