Distributing Pollution Rights in Cap-and-Trade Programs: Are Outcomes Independent of Allocation?

Distributing Pollution Rights in Cap-and-Trade Programs: Are Outcomes Independent of Allocation?∗

Standard economic theory predicts that if property rights to pollute are clearly established, equilibrium outcomes in an effi cient emissions permit market will be independent of how the emissions permits are initially distributed. This so-called independence property has important implications for policy design and implementation. Past studies document a strong positive correlation between the...

Innovation under cap-and-trade programs.

Policies incentivizing the private sector to reach its innovative potential in "clean" technologies are likely to play a key role in achieving climate stabilization. This article explores the relationship between innovation and cap-and-trade programs (CTPs)--the world's most prominent climate policy instrument--through empirical evidence drawn from successful CTPs for sulfur dioxide and nitroge...

Auctions and Relative Allocation Mechanisms for Cap-and-Trade Schemes

The present paper is a contribution to the quantitative analysis of the cap-and-trade schemes touted by some as the regulation of choice in the market based approach to climate change. Its main thrust is twofold. Firstly we prove that the well known social optimality of cap-and-trade schemes, which is the main reason for these schemes to be implemented, can be extended to the multi-period stoch...

Cap-and-Trade Programs and Innovation for Climate Safety

Analysts generally agree that considerable technological innovation will be necessary to reduce greenhouse gas (GHG) emissions to “safe” levels while minimizing economic impacts. Market failures related to both environmental pollution and innovation reduce the likelihood that the private sector will provide that innovation without public intervention. Meanwhile, cap-and-trade programs (CTPs) fo...

Are cap-and-trade programs more environmentally effective than conventional regulation?