Article Dans Une Revue Journal of Environmental Economics and Management Année : 2019

Emission Reduction and Profit-Neutral Permit Allocations

Jean-Philippe Nicolaï
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Résumé

The present paper addresses two policy objectives: to implement a market for pollution permits and to make regulation acceptable for businesses. Profit-neutral permit allocations are defined as the number of permits that the regulator should give for free so that post-regulation profits (i.e. a firm's profits in the products market plus the value of the allowances granted for free) are equal to pre-regulation profits. The proposed model is developed by assuming that firms use polluting technologies and compete "a la Cournot". The paper demonstrates that a low number of free allowances is sufficient to meet these two goals. Moreover, the regulator can fully offset losses, even when the reduction in emissions is high, provided that the sectors concerned are not monopolies, both for isoelastic and linear demand functions

Dates et versions

hal-03084174 , version 1 (20-12-2020)

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Citer

Jean-Philippe Nicolaï. Emission Reduction and Profit-Neutral Permit Allocations. Journal of Environmental Economics and Management, 2019, 93, pp.239-253. ⟨10.1016/j.jeem.2018.12.001⟩. ⟨hal-03084174⟩
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