Moral considerations in trading pollution permits

Johan Eyckmans () and Snorre Kverndokk

No 2008/12, Working Papers from Hogeschool-Universiteit Brussel, Faculteit Economie en Management

Abstract: In this paper we investigate how moral considerations, modelled as identity effects, affects an endogenous pollution permit trading equilibrium, in which governments choose in a non-cooperative way the amount of permits they allocate to their domestic industries. Politicians might feel reluctant to allow unlimited permit trading and/or may prefer that abatement is undertaken domestically due to ethical motivation. However, once governments have chosen permit allocations, firms trade these permits in an international competitive permit market without moral restraints. We show that governments’ moral concerns may actually increase global emissions but this result depends on the precise formulation of the identity function. Finally, we explore how exogenous technological change affects endogenous permit trading equilibria under identity considerations. We show that decreasing costs of abatement technologies may lead countries to overcome their reluctance to trading emission permits.

Keywords: Tradeable emission permits; noncooperative game theory; moral motivation; identity; technological change (search for similar items in EconPapers)
Pages: 31 pages
Date: 2008-02
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Citations: View citations in EconPapers (4)

Published in Ecological Economics, Vol. 69(9), 2010, pp. 1814-1823

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http://lirias.hubrussel.be/handle/123456789/2226 first version (application/pdf)
http://dx.doi.org/10.1016/j.ecolecon.2010.04.020 published version (application/pdf)

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Persistent link: https://EconPapers.repec.org/RePEc:hub:wpecon:200812

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