Markets for emission permits with free endowment: a vintage capital analysis

Thierry Bréchet, Tsvetomir Tsachev () and Vladimir Veliov ()
Additional contact information
Tsvetomir Tsachev: Institute of Mathematics and Informatics, Bulgarian Academy of Sciences, 1113 Sofia, Bulgaria

No 2010017, LIDAM Discussion Papers CORE from Université catholique de Louvain, Center for Operations Research and Econometrics (CORE)

Abstract: In this paper we develop a vintage capital model for a firm involved in a market for tradable emission permits. We analyze both the firm’s optimal investment plans and the market equilibrium. This allows us to scrutinize how firms use permits free endowment, and to highlight the implications of non-optimal uses both at the firm and at the market level. We provide a new rationale for the market of tradable permits not to be cost-efficient. The novel technical points in this context are the use a distributed (vintage) optimal control model of the firm, the use of optimality conditions for non-smooth problems, and the involvement of a nonlinear Fredholm integral equation of the first kind for the description of the equilibrium price of permits, and its practical meaning for market regularization.

Date: 2010-05-01
New Economics Papers: this item is included in nep-ene and nep-env
References: Add references at CitEc
Citations:

Downloads: (external link)
https://sites.uclouvain.be/core/publications/coredp/coredp2010.html (application/pdf)

Related works:
Working Paper: Markets for emission permits with free endowment: a vintage capital analysis (2012)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cor:louvco:2010017

Access Statistics for this paper

More papers in LIDAM Discussion Papers CORE from Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) Voie du Roman Pays 34, 1348 Louvain-la-Neuve (Belgium). Contact information at EDIRC.
Bibliographic data for series maintained by Alain GILLIS ().