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

  • Utilization of Scenarios in European Electricity Policy: The Ten-Year Network Development Plan https://t.co/vThBD9X36P

    December 12th

  • New OIES study on China’s use of Natural Gas, LNG to tackle air pollution: As of August 2018, China had 18 receivin… https://t.co/XIqu9VqDxT

    December 11th

  • New OIES study on China’s use of natural gas and LNG to tackle air pollution: Natural gas has witnessed growth in a… https://t.co/s0ZlK3iQAp

    December 11th

Sign up for our Newsletter

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