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Emissions trading systems with cap adjustments
Open accessAbstract
Emissions Trading Systems (ETSs) with fixed caps lack provisions to address systematic imbalances in the supply and demand of permits due to changes in the state of the regulated economy. We propose a mechanism which adjusts the allocation of permits based on the current bank of permits. The mechanism spans the spectrum between a pure quantity instrument and a pure price instrument. We solve the firms׳ emissions control problem and obtain an explicit dependency between the key policy stringency parameter—the adjustment rate—and the firms׳ abatement and trading strategies. We present an analytical tool for selecting the optimal adjustment rate under both risk-neutrality and risk-aversion, which provides an analytical basis for the regulator׳s choice of a responsive ETS policy.
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Metadata
- Authors
- Kollenberg, S., & Taschini, L.
- Affiliations
- University of Duisburg-Essen (DE)
- London School of Economics and Political Science (GB)
- Corresponding author
- Taschini, Luca
- ORCID
- Taschini, Luca
- Venue
- Journal of Environmental Economics and Management
- Publisher
- Elsevier BV
- Published
- 2016-11
- Volume
- 80
- Pages
- 20-36
- ISSN
- 0095-0696 (ISSN-L)
- OpenAlex
- W2911748944
- Cited by
- 107
- References
- 23
- Citations by year
- 2026: 7 · 2025: 14 · 2024: 17 · 2023: 11 · 2022: 10 · 2021: 6 · 2020: 16 · 2019: 10 · 2018: 8 · 2017: 5 · 2016: 3
- FWCI
- 16.87
- Type
- journal article
- Language
- en
- Open access
- hybrid
- doi.org
- Locations
- Journal of Environmental Economics and Management (publishedVersion, cc-by)
- RePEc: Research Papers in Economics (submittedVersion)
- London School of Economics and Political Science Research Online (London School of Economics and Political Science) (submittedVersion)
- London School of Economics and Political Science Theses Online (London School of Economics and Political Science) (submittedVersion)
- Funders
- European Commission (308481)
- Bundesministerium für Bildung und Forschung
- Universität Duisburg-Essen
- Economic and Social Research Council (ES/K006576/1)
- Topics
- Social Sciences › Economics, Econometrics and Finance › Economics and Econometrics › Climate Change Policy and Economics
- Social Sciences › Economics, Econometrics and Finance › Economics and Econometrics › Energy, Environment, Economic Growth
- Physical Sciences › Environmental Science › Pollution › Environmental Policies and Emissions
- Keywords
- emissions trading system, permit allocation, abatement strategies, risk aversion, regulatory stringency, carbon pricing
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