Frictions in Project-Based Supply of Permits

Matti Liski () and Juha Virrankoski ()

Environmental & Resource Economics, 2004, vol. 28, issue 3, 347-365

Abstract: Emissions trading in climate change can entail large overall cost savings and transfers between developed and developing countries. However, the search for acceptable JI or CDM projects implies a deviation from the perfect market framework used in previous estimations. Our model combines the search market for projects with a frictionless permit market to quantify the supply-side frictions in the CO 2 market. We also decompose the effects of frictions into the effects of search friction, bargaining, and bilateralism. A calibration using previous cost estimates of CO 2 reductions illustrate changes in cost savings and allocative implications. Copyright Kluwer Academic Publishers 2004

Keywords: climate change; matching; pollution permits (search for similar items in EconPapers)
Date: 2004
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DOI: 10.1023/B:EARE.0000031060.86739.28

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