Investment Incentives under Emission Trading: An Experimental Study

Eva Camacho-Cuena (), Till Requate () and Israel Waichman ()
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Eva Camacho-Cuena: LEE & Economics Department, Universitat Jaume I, Castellón, Spain
Authors registered in the RePEc Author Service: Eva Camacho Cuena ()

No 2012/22, Working Papers from Economics Department, Universitat Jaume I, Castellón (Spain)

Abstract: This paper presents the results of an experimental investigation on incentives to adopt advanced abatement technology under emissions trading. Our experimental design mimics an industry with small asymmetric polluting firms regulated by different schemes of tradable permits. We consider three allocation/auction policies: auctioning off (costly) permits through an ascending clock auction, grandfathering permits with re-allocation through a single-unit double auction, and grandfathering with reallocation through an ascending clock auction. Our results confirm both dynamic and static theoretical equivalence of auctioning and grandfathering. We nevertheless find that although the market institution used to reallocate permits does not impact the dynamic efficiency from investment, it affects the static efficiency from permit trading.

Keywords: Environmental policy; abatement technology; taxes; permit trading; auctions opportunity; Ultimatum Game (search for similar items in EconPapers)
JEL-codes: C92 D44 L51 Q28 Q55 (search for similar items in EconPapers)
Pages: 41 pages
Date: 2012
New Economics Papers: this item is included in nep-ene, nep-env, nep-exp and nep-reg
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Citations: View citations in EconPapers (17)

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Journal Article: Investment Incentives Under Emission Trading: An Experimental Study (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:jau:wpaper:2012/22

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