Emissions Trading with Profit-Neutral Permit Allocations

This paper examines the impact of an emissions trading scheme (ETS) on industry output price costs emissions market shares and proits. We develop formulae for the number of emissions permits that have to be freely allocated to firms in order to neutralize any adverse impact the ETS may have on proits. Under quite general conditions industry proits are preserved so long as firms are freely allocated a fraction of their total demand for permits with this fraction lower than the industry’s Herfindahl index. Our results have important implications for ETS design especially for its ability to raise government revenue.

By: Cameron Hepburn , Robert Ritz , John K. H. Quah

Latest Tweets from @OxfordEnergy

  • OIES study on Russia’s refining system reviewed: Plans for further additions of more complex refining units have be… https://t.co/GTmB7XB5g0

    April 16th

  • New OIES paper on Russian refining sector and fuel oil exports: From 2015, as a result of new export tax policies,… https://t.co/2OFbXIbbUX

    April 15th

  • Russia’s heavy fuel oil exports: challenges and changing rules at home and abroad https://t.co/cDMQaw7xP9

    April 15th

Sign up for our Newsletter

Register your email address here and we will send you notification of new publications, comment, articles etc. automatically.