The Dynamics of Pollution Permits

Makoto Hasegawa and Stephen Salant

Annual Review of Resource Economics, 2015, vol. 7, issue 1, 61-79

Abstract: We review the literature on bankable emissions permits that has developed over the last two decades. Most articles analyze either theoretical or simulation models. The theoretical literature considers the problem of minimizing the discounted sum of social costs and the possibility of decentralizing the solution through competitive permit markets. In some cases, authors do not explicitly consider pollution damages but instead assume that the planner’s goal is to minimize the discounted social cost of reducing cumulative emissions by a given amount. In other cases, authors do not explicitly consider an emissions reduction target but assume that the goal is to minimize the discounted sum of pollution damages and abatement costs. Simulations permit evaluation of alternative government policies under uncertainty. We conclude by pointing out directions for future work.

Keywords: emissions trading; marketable permits; cap and trade; banking (search for similar items in EconPapers)
JEL-codes: H23 Q52 Q54 (search for similar items in EconPapers)
Date: 2015
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Citations: View citations in EconPapers (13)

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Working Paper: The Dynamics of Pollution Permits (2015)
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