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An Experimental Analysis of Compliance in Dynamic Emissions Markets

John Stranlund (), James Murphy () and John Spraggon ()

No 2010-3, Working Papers from University of Massachusetts Amherst, Department of Resource Economics

Abstract: Two important design elements for emission trading programs are whether and to what extent firms are able to bank emissions permits, and how these programs are to be enforced. In this paper we present results from laboratory emissions markets designed to investigate enforcement and compliance when these markets allow permit banking. Banking is motivated by a decrease in the aggregate permit supply in the middle of multi-period trading sessions. Consistent with theoretical insights, our experiments suggest that high permit violation penalties have little deterrence value in dynamic emissions markets, and that the main challenge of enforcing these programs is to motivate truthful self-reports of emissions.

Keywords: compliance; enforcement; emissions trading; laboratory experiments; permit markets; permit banking (search for similar items in EconPapers)
JEL-codes: C91 L51 Q58 (search for similar items in EconPapers)
Pages: 44 pages
Date: 2010-08
New Economics Papers: this item is included in nep-ene, nep-env, nep-exp and nep-reg
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Related works:
Journal Article: An experimental analysis of compliance in dynamic emissions markets (2011) Downloads
Working Paper: An Experimental Analysis of Compliance in Dynamic Emissions Markets (2011) Downloads
Working Paper: An Experimental Analysis of Compliance in Dynamic Emissions Markets (2010) Downloads
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