Initial Allocation Effects in Permit Markets with Bertrand Output Oligopoly

Evan Calford, Christoph Heinzel and Regina Betz

No 95066, Research Reports from Australian National University, Environmental Economics Research Hub

Abstract: We analyse the efficiency effects of the initial permit allocation given to firms with market power in both permit and output market. We examine two models: a long- run model with endogenous technology and capacity choice, and a short-run model with fixed technology and capacity. In the long run, quantity pre-commitment with Bertrand competition can yield Cournot outcomes also under emissions trading. In the short run, Bertrand output competition reproduces the effects derived under Cournot competition, but displays higher pass-through profits. In a second-best setting of overallocation, a tighter emissions target tends to improve permit-market efficiency in the short run.

Keywords: Resource/Energy; Economics; and; Policy (search for similar items in EconPapers)
Pages: 37
Date: 2010-03
New Economics Papers: this item is included in nep-com, nep-ene, nep-env, nep-ind and nep-mic
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https://ageconsearch.umn.edu/record/95066/files/In ... tput%20Oligopoly.pdf (application/pdf)

Related works:
Working Paper: Initial Allocation Effects in Permit Markets with Bertrand Output Oligopoly (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:ags:eerhrr:95066

DOI: 10.22004/ag.econ.95066

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