@article{Jotzo:249528,
      recid = {249528},
      author = {Jotzo, Frank and Hatfield-Dodds, Steve},
      title = {Price Floors in Emissions Trading to Reduce Policy Related  Investment Risks: an Australian View},
      address = {2011-05},
      number = {450-2016-34064},
      pages = {19},
      year = {2011},
      abstract = {The merits of floor prices in emissions trading schemes  (ETS) depend on the problem
addressed. Traditional hybrid  approaches emphasise automatic response to lower  than
anticipated abatement costs, but we find adjusting  emissions targets over time is the
better way to deal with  this in the context of climate policy. We find, however,  that a
price floor is well suited to addressing policy  generated carbon price risk as domestic and
international  policy frameworks mature, reducing the risk of unintended  low carbon
prices. Reducing such downside risk can  encourage cost effective investment in lowemissions
assets  that might otherwise be precluded by perceived policy  risks, even if the
price floor is never actually triggered.  In Australia’s planned ETS, a price floor could
support  investments that lower the national emissions trajectory,  and boost policy
stability and credibility. A price floor  in operation can increase the static costs of
achieving a  given emissions target, but reduce economic costs over  time. Assessment of
implementation options suggests a  domestic reserve price for auctioned permits along
with a  periodically adjusted fee on the conversion of  international permits for use in the
domestic ETS. This  approach minimises administrative complexity and avoids  arbitrary
interventions in carbon markets.},
      url = {http://ageconsearch.umn.edu/record/249528},
      doi = {https://doi.org/10.22004/ag.econ.249528},
}