Transaction costs and tradable permits: Empirical evidence from the EU emissions trading scheme

Peter Heindl

No 12-021, ZEW Discussion Papers from ZEW - Leibniz Centre for European Economic Research

Abstract: In this paper, transaction costs in the EU emissions trading scheme (EU ETS) are examined empirically based on survey data from German companies. Transaction costs from measurement, reporting and verification (MRV) of emissions, permit trading and general informational costs are considered. Transaction costs from MRV and permit trading are of non-linear form and dependent on annual emission and trading volumes based on OLS and nonparametric estimation. As a consequence of non-linear transaction costs, welfare losses occur compared to a first-best setup under zero transaction costs. In practice, smaller emitters will emit less (abate more) compared to larger emitters and vice versa due to economies of scale in the management of emissions trading. The results further imply that optimal firm size might be influenced by transaction costs in the EU ETS because of relatively high average transaction costs amongst smaller emitters. Overall annual transaction costs in the EU ETS in Germany are estimated to be EUR 8.7 million.

Keywords: Emissions Trading; Transaction Costs; EU ETS (search for similar items in EconPapers)
JEL-codes: D23 H23 Q52 (search for similar items in EconPapers)
Date: 2012
New Economics Papers: this item is included in nep-ene, nep-env and nep-eur
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (31)

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Persistent link: https://EconPapers.repec.org/RePEc:zbw:zewdip:12021

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