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Title:Initial Allocation Effects in Permit Markets with Bertrand Output Oligopoly PDF Logo
Authors:Betz, Regina
Calford, Evan M.
Heinzel, Christoph
Issue Date:2010
Series/Report no.:Beiträge zur Jahrestagung des Vereins für Socialpolitik 2010: Ökonomie der Familie - Session: Regulating Related Industries E9-V3
Abstract:We analyse the efficiency effects of the initial permit allocation given to firms with market power in both permit and output market. We examine two models: a long-run model with endogenous technology and capacity choice, and a short-run model with fixed technology and capacity. In the long run, quantity pre-commitment with Bertrand competition can yield Cournot outcomes also under emissions trading. In the short run, Bertrand output competition reproduces the effects derived under Cournot competition, but displays higher pass-through profits. In a second-best setting of overallocation, a tighter emissions target tends to improve permit-market efficiency in the short run.
Subjects:emissions trading
initial permit allocation
Bertrand competition
EU ETS
endogenous technology choice
Kreps and Scheinkman
JEL:L13
Q28
D43
Document Type:Conference Paper
Appears in Collections:Jahrestagung des Vereins für Socialpolitik 2010: Ökonomie der Familie

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