Environmental policy and speculation on markets for emission permits

Paolo Colla (), Marc Germain and Vincent van Steenberghe

No 2005066, LIDAM Discussion Papers CORE from Université catholique de Louvain, Center for Operations Research and Econometrics (CORE)

Abstract: Tradable emission permits share many characteristics with financial assets. As on financial markets, speculators are likely to be active on large markets for emission permits such as those developing under the Kyoto Protocol. We show how the presence of speculators on a market for emission permits affects the price of these permits when firms face risk aversion. The agency in charge of the optimal environmental policy should account for the presence of speculators when determining the total amount of permits to issue.

Date: 2005-10
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Citations: View citations in EconPapers (4)

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Related works:
Journal Article: Environmental Policy and Speculation on Markets for Emission Permits (2012)
Working Paper: Environmental policy and speculation on markets for emission permits (2005)
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Persistent link: https://EconPapers.repec.org/RePEc:cor:louvco:2005066

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