Investment Incentives Under Emission Trading: An Experimental Study

Camacho-Cuena, Eva, Requate, Till and Waichman, Israel (2012) Investment Incentives Under Emission Trading: An Experimental Study Environmental & Resource Economics, 53 (2). pp. 229-249.

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This paper presents the results of an experimental investigation on incentives to adopt advanced abatement technology under emissions trading. Our experimental design mimics an industry with small asymmetric polluting firms regulated by different schemes of tradable permits. We consider three allocation/auction policies: auctioning off (costly) permits through an ascending clock auction, grandfathering permits with re-allocation through a single-unit double auction, and grandfathering with re-allocation through an ascending clock auction. Our results confirm both dynamic and static theoretical equivalence of auctioning and grandfathering. We nevertheless find that although the market institution used to reallocate permits does not impact the dynamic efficiency from investment, it affects the static efficiency from permit trading.

Document Type: Article
Research affiliation: Kiel University
OceanRep > The Future Ocean - Cluster of Excellence
Kiel University > Kiel Marine Science
Refereed: Yes
ISSN: 0924-6460
Projects: Future Ocean
Date Deposited: 14 May 2014 10:18
Last Modified: 14 May 2014 10:18

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