Market Power in Emission Permit Markets: Theory and Evidence from the EU ETS

Hintermann, Beat

doi:10.1007/s10640-015-9939-4

Cited by 77 publications

(55 citation statements)

References 42 publications

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“…Based on Hahn's model framework, Westskog extended to multiple agents with market power [8], and other articles considered the output market and noted that the dominant firm will exercise its market power to raise its rivals' cost [9,10]. This main finding has also been demonstrated by other scholars [5,[11][12][13][14]. In the context of international ETS, the issue of market power in the permits market has been recognized to be a challenging potential problem [15,16].…”

Section: Introductionmentioning

confidence: 89%

“…Moreover, these economic incentives may be the most crucial approaches to ensure the attainment of the deep carbon dioxide (CO 2 ) emissions reduction target in the long term [1]. However, in common with many other commodity markets, the emission trading market has also been affected by market power, and several dominant firms play a key role in permit prices [2][3][4][5][6]. Following Hahn's seminal article [7], there is substantial theoretical literature analyzing the issues of market power in the permits market.…”

Section: Introductionmentioning

confidence: 99%

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Market Power and Technology Diffusion in an Energy-Intensive Sector Covered by an Emissions Trading Scheme

Zeng

Zhu

2019

Sustainability

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The emissions trading scheme (ETS) has been long advocated to address climate change not only because it is cost effective but also because it can provide economic incentives for the adoption of new technologies. The emissions abatement of the energy-intensive sector covered by ETS is of great significance for the whole nation to attain sustainable and low-carbon development, especially for developing countries. This paper investigates the effect of market power in the emissions trading market on the diffusion of a new emissions abatement technology when firms in the energy-intensive sector interact in an imperfectly competitive output market. In the model, each firm needs to determine the optimal time to adopt the new emissions abatement technology, taking into account its benefits and costs, as well as its rival's strategic behavior. With this framework, the results suggest that firms will delay adoption of the new emissions abatement technology in the presence of market power. Moreover, when the output demand is larger and more elastic, emissions abatement technology diffusion will occur earlier. It implies that the technology diffusion in the weak elastic sector, such as the Chinese iron and steel sector, may have more barriers than that in the strong elastic sector, such as the Chinese nonferrous metals sector.

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Section: Introductionmentioning

confidence: 89%

Section: Introductionmentioning

confidence: 99%

Market Power and Technology Diffusion in an Energy-Intensive Sector Covered by an Emissions Trading Scheme

Zeng

Zhu

2019

Sustainability

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“…Each of these basic approaches is in wide use nowadays. We may name few works by K. J. Elzinga and D. E. Mills (2011) [12], L. Correa and P. Crocioni (2012) [13], J. Tirole and E. Glen Weyl (2012) [14], S. Littlechild (2014) [15], N.-P. Schepp and A. Wambach (2016) [16], and B. Hintermann (2017) [17]. The downside of these studies is their fragmentation, as they focus only on some dimensions of competition.…”

Section: Brief Literature Reviewmentioning

confidence: 99%

The methodology of competition assessment

Gerasymenko¹,

Borovyk²,

Afendikova³

2017

EA-XXI

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Introduction. Since competition influences all the spheres of economic life, its research is scattered among different fields of economic science and different research areas. The purpose of the article is to systematize existing approaches to competition assessment, based on single multidimensional methodological approach, to make economic competition research at the micro-, meso-and macrolevels better managed and presented, as well as to develop comprehensive system of indicators to assess the state of economic competition. Results. Having used the Porter's diamond model, the authors divided three dimensions of competition research: horizontal (within the relevant market or stack of related markets), vertical (within the process chain), and potential competition dimension (within all the markets in the economy due to the capital flow between them that provides competitive pressure on the participants of the relevant market). The sets of indicators of the relevant type of competition are identified within every research dimension. Combined use of these indicators allows us to determine current state of competition in the market, and to verify the results obtained. The aggregated system of competition indicators is introduced to ensure comprehensive and more profound analytical support for managerial decisions.

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“…This least-cost result relies on the existence of low transactions costs as well as players acting competitively. 2 Yet players' strategic behavior in these markets-and the resulting social losses-are a real concern (Montero, 2009;Hintermann, 2015). 3 The actions of large and influential players in the market have 1 Examples include the European Union Emissions Trading Scheme (EU ETS), Regional Greenhouse Gas Initiative (RGGI), Western Climate Initiative (WCI), and New Zealand Emissions Trading Scheme (NZ ETS).…”

Section: Introductionmentioning

confidence: 99%

“…3 For example, Montero (2009) highlights these problems both within the U.S. sulfur permit marketwhere 43% of permits allocations were allocated to just four players-as well as an international carbon market, where strategic behavior may exist between countries. More recently, Hintermann (2015) provides evidence of price manipulation in the EU-ETS. the potential to distort the equilibrium permit price, reduce the cost effectiveness of pollution control, and influence the product market equilibrium.…”

Section: Introductionmentioning

confidence: 99%

Strategic trade in pollution permits

Dickson

MacKenzie

2018

Journal of Environmental Economics and Management

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Markets for pollution have become a popular regulatory instrument. Yet these markets are often highly concentrated, which may lead to strategic behavior by all participants. In this article we investigate the implications of strategic trade in pollution permits. The permit market is developed as a strategic market game, where all firms are allowed to behave strategically and their roles as buyers or sellers of permits are determined endogenously with price-mediated trade. In a second stage, firms transact on a product market and we allow for a variety of market structures. Our framework establishes the endogenous determination of equilibrium price, market structure, and levels of exchange in the permit market.

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Market Power in Emission Permit Markets: Theory and Evidence from the EU ETS

Cited by 77 publications

References 42 publications

Market Power and Technology Diffusion in an Energy-Intensive Sector Covered by an Emissions Trading Scheme

Market Power and Technology Diffusion in an Energy-Intensive Sector Covered by an Emissions Trading Scheme

The methodology of competition assessment

Strategic trade in pollution permits

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