Bankable Prices

Garth Heutel

No 25235, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Allowing emissions permits to be banked and borrowed over time can yield efficiency gains. I develop a model to demonstrate that banking and borrowing can also be allowed for a price policy. I compare expected welfare between price and quantity policies, with and without banking, under several different scenarios regarding uncertainty. A bankable policy can provide an efficiency improvement by allowing for smoothing of costs, though it does not necessarily dominate a policy that does not allow banking. The ranking of prices vs. quantities and of bankability vs. non-bankability depends on both the slopes of marginal costs and benefits and on the specification of uncertainty.

JEL-codes: D62 H23 Q54 Q58 (search for similar items in EconPapers)
Date: 2018-11
New Economics Papers: this item is included in nep-env and nep-reg
Note: EEE PE
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