Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/225347 
Authors: 
Year of Publication: 
2018
Citation: 
[Journal:] Environmental & Resource Economics [ISSN:] 0924-6460 [Volume:] 70 [Issue:] 1 [Publisher:] Springer [Place:] Berlin [Year:] 2018 [Pages:] 77-106
Publisher: 
Springer, Berlin
Abstract: 
International carbon offset certificates were cheaper than European Union Allowances, although they were substitutes within the EU Emissions Trading System (EU ETS). Thus, firms had a strong incentive to use offset certificates. However, a considerable number of firms did not exhaust their offset quota and, by doing so, seemingly forwent profits. While most literature on emissions trading evaluates the efficiency of regulation in a frictionless world, in practice firms incur costs when complying with regulation. In order to assess the relevance of trade-related fixed transaction costs, this study examines the use of international offset credits in the EU ETS. It establishes a model of firm decision under fixed (quantity-invariant) entry costs and estimates the size of such costs rationalizing firm behavior using semi-parametric binary quantile regressions. Comparing binary quantile results with probit estimates shows that high average transaction costs result from a strongly skewed underlying distribution. For most firms, the bulk of transaction costs stems from certificate trading in general, rather than additional participation in offset trading.
Subjects: 
Binary quantile estimation
CDM
Carbon emissions trading
Entry costs
EU ETS
Offset certificates
Semi-parametric estimation
Transaction costs
JEL: 
C25
D23
H23
Q58
Published Version’s DOI: 
Document Type: 
Article
Document Version: 
Accepted Manuscript (Postprint)

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