Alternative intertemporal permit trading regimes with stochastic abatement costs
Economics, Center for Agricultural and Rural Development
Journal or Book Title
Resource and Energy Economics
First Page or Article ID Number
We examine the social efficiency of alternative intertemporal permit trading regimes. The role of uncertainty and information asymmetry is discussed. For banking to be welfare improving, uncertainty itself does not matter, while information asymmetry does. Three effects of banking are identified: externality effect, information effect, and total permit effect. In the absence of total permit effect, banking is welfare improving if information effect is positive and dominates the externality effect. The relative efficiency of banking regimes with different intertemporal trading ratios is affected by the slope of the benefit and damage functions and the covariance of the shocks.
Feng, Hongli and Zhao, Jinhua, "Alternative intertemporal permit trading regimes with stochastic abatement costs" (2006). Economics Publications. 795.