Citizen Participation in Pollution Permit Markets
25 Pages Posted: 8 Sep 2004
Date Written: August 30, 2004
Abstract
Should citizens lobby the government to reduce pollution permit endowments or should they participate directly in the market by purchasing and retiring permits? We address this question in a two-stage model. In the first stage firms and citizens exert effort to influence the endowment of permits. In the second stage firms, and perhaps citizens, participate in the permit market. Even when citizens choose not to purchase permits, the possibility of doing so may affect the equilibrium. In our basic model, citizens choose not to purchase permits; relaxing any of three assumptions can reverse this result.
Keywords: Pollution permits, premit retirement, rent seeking
JEL Classification: D72, Q58
Suggested Citation: Suggested Citation