Environmental economics and modeling marketable permits

Luca Taschini

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

Abstract: This paper reviews fundamental concepts in environmental economics and explores theoretical results regarding the choice of the key policy instruments for the control of externalities: taxes, subsidies and marketable permits. The paper explains why today market mechanisms are increasingly being used as a tool for allocating unpriced rights and scarce resources. We survey how significant market imperfections, a pre-existing regulatory environment and concentration in both permit and output markets can impede the proper functioning of a permit system. The main factors that affect the effectiveness of marketable permits are then discussed. Given the importance of understanding the emission permit price formation, we overview recent attempts at developing valid price models for emission permits, taking into account banking and borrowing opportunities, pollution abatement measures, strategic trading interactions and the presence of asymmetric information in the permit market.

Keywords: dynamic price modeling; emission permits; market imperfections (search for similar items in EconPapers)
JEL-codes: C60 G13 Q50 Q56 Q58 (search for similar items in EconPapers)
Pages: 21 pages
Date: 2010-09
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
http://eprints.lse.ac.uk/37596/ Open access version. (application/pdf)

Related works:
Journal Article: Environmental Economics and Modeling Marketable Permits (2010)
Working Paper: Environmental economics and modeling marketable permits (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:ehl:lserod:37596

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