Enforcing Emissions Trading when Emissions Permits are Bankable

John Kevin Stranlund, Christopher Costello () and Carlos Chávez ()

Journal of Regulatory Economics, 2005, vol. 28, issue 2, pages 181-204

Abstract: We propose enforcement strategies for emissions trading programs with bankable emissions permits that guarantee complete compliance with minimal enforcement costs. Our strategies emphasize imperfect monitoring supported by a high unit penalty for reporting violations, and tying this penalty directly to equilibrium permit prices. This approach is quite different from several existing enforcement strategies that emphasize high unit penalties for emissions in excess of permit holdings. Our analysis suggests that a high penalty for excess emissions cannot be used to conserve monitoring effort, and that it may actually increase the amount of monitoring necessary to maintain compliance. Copyright Springer Science+Business Media, Inc. 2005

Keywords: compliance; enforcement; emissions trading; permit banking; L51; Q28 (search for similar items in EconPapers)
Date: 2005
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