Optimal pollution permit endowments in markets with endogenous emissions |
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Authors: | Stefani C. Smith Andrew J. Yates |
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Affiliation: | a School of Business Administration, Lander University, Greenwood, SC 29649, USA;b Department of Economics, E. Claiborne Robins School of Business, 1 Gateway Road, University of Richmond, Richmond, VA 23173, USA |
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Abstract: | In a permit market with endogenous emissions, both firms and citizens purchase permits. Presented here are static and dynamic models of pollution permit markets with endogenous emissions. The optimal permit endowments are characterized when the regulator faces uncertainty about damages and uncertainty about the severity of the citizens’ collective action problem. Due to the possibility of learning over time, the regulator issues a larger number of permits in the first period of the dynamic model than in the static model. |
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Keywords: | Pollution permits Endogenous emissions Learning Endowment |
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