ALTERNATIVE INTERTEMPROAL PERMIT TRADING REGIMES WITH STOCHASTIC ABATEMENT COSTS

Hongli Feng and Jinhua Zhao

No 18543, Hebrew University of Jerusalem Archive from Hebrew University of Jerusalem

Abstract: We examine the social efficiency of alternative intertemporal permit trading regimes. Banking with a 1-to-1 ratio and with a non-unitary intertemporal trading ratio (ITR) are compared with each other and with the no-banking permit trading regime. The more industry-wide shocks vary, and/or the more they are negatively correlated across time, the more efficient is a bankable permit regime. When the slope of the benefit function is greater than the slope of the damage function, banking with ITR=1+r is more efficient than a no-banking regime. Banking with ITR=1 can be more efficient than a no-banking regime. However, whether ITR=1 or ITR=1+r is better depends on the covariance structure of the shocks and the benefit and damage functions.

Keywords: Environmental; Economics; and; Policy (search for similar items in EconPapers)
Pages: 27
Date: 2002
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Persistent link: https://EconPapers.repec.org/RePEc:ags:hebarc:18543

DOI: 10.22004/ag.econ.18543

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