Pollution Permits in Oligopolies: The role of abatement technologies

Clémence Christin (), Jean-Philippe Nicolaï () and Jerome Pouyet
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Clémence Christin: CREM - Centre de recherche en économie et management - UNICAEN - Université de Caen Normandie - NU - Normandie Université - UR - Université de Rennes - CNRS - Centre National de la Recherche Scientifique
Jean-Philippe Nicolaï: EconomiX - EconomiX - UPN - Université Paris Nanterre - CNRS - Centre National de la Recherche Scientifique

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Abstract: This paper examines, under imperfect competition, the effect of a cap-and-trade system on industry profits and the interaction between cap-and-trade system and the evolution of the market structure, both depending on the type of abatement technologies used by firms. Two extreme types are considered: end-of-pipe abatement technology-meaning, filtration and other mechanisms that are largely independent of production decisionsand process-integrated technology, which entails integrating cleaner or more energy-efficient methods into production. This paper prescribes that the distribution of free allocation should depend on the kind of abatement technologies. Finally, a reserve of pollution permits for new entrants is justified when the industry uses a process-integrated abatement technology, while a system with a preemption right may be justified in the case of end-of-pipe abatement technology.

Keywords: cap-and-trade system; imperfect competition; end-of-pipe abatement; process-integrated abatement; reserve for entrants (search for similar items in EconPapers)
Date: 2021-08-30
New Economics Papers: this item is included in nep-com, nep-ene, nep-env, nep-isf and nep-reg
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