Technology Adoption in Emission Trading Programs with Market Power

Francisco J. André and Carmen Arguedas
Authors registered in the RePEc Author Service: Francisco J. André

The Energy Journal, 2018, vol. 39, issue 1_suppl, 145-174

Abstract: In this paper we study the relationship between market power in emission permit markets and endogenous technology adoption. We find that the initial distribution of permits, in particular, the amount of permits initially given to the dominant firm, is crucial in determining over- or under-investment in relation to the benchmark model without market power. Specifically, if the dominant firm is initially endowed with more permits than the corresponding cost effective allocation, this results in under-investment by the dominant firm and over-investment by the competitive fringe, regardless of the specific amount of permits given to the latter firms. The results are reversed if the dominant firm is initially endowed with relatively few permits. Also, the presence of market power results in a divergence of both abatement and technology adoption levels with respect to the benchmark scenario of perfect competition, as long as technology adoption becomes more effective in reducing abatement costs.

Keywords: Environmental policy; emission permits; market power; environmentally-friendly technologies (search for similar items in EconPapers)
Date: 2018
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Citations: View citations in EconPapers (1)

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Journal Article: Technology Adoption in Emission Trading Programs with Market Power (2018)
Working Paper: Technology adoption in emission trading programs with market power (2017)
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Persistent link: https://EconPapers.repec.org/RePEc:sae:enejou:v:39:y:2018:i:1_suppl:p:145-174

DOI: 10.5547/01956574.39.SI1.fand

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