Regulated firms in pollution permit markets with banking

Cronshaw, Mark B.; Kruse, Jamie Brown

doi:10.1007/bf00240369

Cited by 166 publications

(126 citation statements)

References 8 publications

Supporting

Mentioning

120

Contrasting

Unclassified

Order By: Relevance

“…This suggests that for the constant-decline path there is little abatement cost trade-off between the addition of a price floor and a more restrictive allowance issuance path when banking/borrowing is not allowed. Finally, as has been shown in other related studies (e.g., Kruse 1996 andRubin 1996), we see that including banking/borrowing, even if the borrowing is restricted, can lead to considerable discounted abatement cost savings compared to a quantity policy without intertemporal trading when the allowance issuance path varies significantly from the firm-optimal path. Finally, we evaluate the hybrid mechanisms under a combination of the scenarios described above.…”

Section: Reviewing Cumulative Emissions Results Presented Insupporting

confidence: 85%

“…The design of optimal intertemporal trading schemes with path-dependent pollutants has been explored by, among others, Rubin (1996), Cronshaw and Kruse (1996), Kling and Rubin (1997), and Yates and Cronshaw (2001). However, most GHGs are stock pollutants, meaning that the damage is a function of the accumulated stock of the pollutant.…”

Section: Results With Restrictions On Borrowingmentioning

confidence: 99%

See 1 more Smart Citation

Alternative Approaches to Cost Containment in a Cap-and-Trade System

Fell

Morgenstern

2010

Environ Resource Econ

View full text Add to dashboard Cite

Alternative Approaches to Cost Containment in a Cap-and-Trade SystemHarrison Fell and Richard D. Morgenstern AbstractWe compare several emissions reduction instruments, including quantity policies with banking and borrowing, price policies, and hybrid policies (safety valve and price collar), using a dynamic model with stochastic baseline emissions. The instruments are compared under the design goal of obtaining the same expected cumulative emissions across all options. Based on simulation analysis with the model parameterized to values relevant to proposed U.S. climate mitigation policies, we find that restrictions on banking and borrowing, including the provision of interest rates on the borrowings, can severely limit the value of the policy, depending on the regulator-chosen allowance issuance path. Although emissions taxes generally provide the lowest expected abatement costs, a cap-and-trade system combined with either a safety valve or a price collar can be designed to provide expected abatement costs near those of a tax, but with lower emissions variance than a tax. Consistently, a price collar is more cost-effective than a safety valve for a given expected cumulative emissions outcome because it encourages inexpensive abatement when abatement costs decline.

show abstract

Section: Reviewing Cumulative Emissions Results Presented Insupporting

confidence: 85%

Section: Results With Restrictions On Borrowingmentioning

confidence: 99%

Alternative Approaches to Cost Containment in a Cap-and-Trade System

Fell

Morgenstern

2010

Environ Resource Econ

View full text Add to dashboard Cite

show abstract

“…Here banked region H permits are only valid in region H and banked region L permits are only valid in region L. 17 If a firm in one region is holding any permits banked from the other region, they may sell these permits in the other region's market. 15 See Cronshaw and Kruse (1996). 16 Suppose that γ ℓn 4 0.…”

Section: Asymmetric Delinkingmentioning

confidence: 99%

Terminating Links between Emission Trading Programs

Pizer

Yates

2014

SSRN Journal

View full text Add to dashboard Cite

“…Note that the existing literature such as Cronshaw and Kruse (1996), Rubin (1996) and Schennach (2000) studies welfare effects of the banking and borrowing. To our best knowledge, this paper is the first to analyze the impact on the prices of contingent claims when banking and borrowing are introduced to the permit markets in a general equilibrium framework.…”

Section: Arbitrage With Banking and Borrowing Permitsmentioning

confidence: 99%

“…In this setting, he derived a pricing formula of forward contracts and illustrated the impact of banking and borrowing on the spot and forward prices. However, Maeda (2004) considered the forward 1 In such previous papers as Rubin (1996) or Cronshaw and Kruse (1996), there is no uncertainty in the model and the effect of banking on the spot price is mainly studied. On the other hand, our model explicitly examines the properties of contingent claims by modeling market participants and the uncertainty in the economy.…”

Section: Introductionmentioning

confidence: 99%

Equilibrium pricing of contingent claims in tradable permit markets

Kijima

Maeda

Nishide

2009

Journal of Futures Markets

View full text Add to dashboard Cite

Abstract. In this paper, we construct a permit market model to derive a pricing formula of contingent claims traded in the market in a general equilibrium framework. It is shown that prices of contingent claims exhibit significantly different properties from those in the ordinary financial markets. In particular, if the social cost function kinks at some level of abatement, the forward price as well as the spot price can be subject to the so-called price spike. However, this price-spike phenomenon can be weakened if the system of banking and borrowing is properly introduced.JEL classification: Q56, G13, G38.

show abstract

Regulated firms in pollution permit markets with banking

Cited by 166 publications

References 8 publications

Alternative Approaches to Cost Containment in a Cap-and-Trade System

Alternative Approaches to Cost Containment in a Cap-and-Trade System

Terminating Links between Emission Trading Programs

Equilibrium pricing of contingent claims in tradable permit markets

Contact Info

Product

Resources

About