Pollution Permits, Imperfect Competition and Abatement Technologies

48 Pages Posted: 27 Nov 2013 Last revised: 6 Oct 2014

See all articles by Clemence Christin

Clemence Christin

Université de Caen

Jean Philippe Nicolai

ETH Zürich

Jérôme Pouyet

Ecole Nationale des Ponts et Chaussées (ENPC) - Centre d'Enseignement et de Recherche en Analyse Socio-Economique (CERAS); National Institute of Statistics and Economic Studies (INSEE) - Center for Research in Economics and Statistics (CREST); Centre for Economic Policy Research (CEPR)

Date Written: November 26, 2013

Abstract

Under imperfect competition, the effect of a cap-and-trade system on industry profits depends on the type of abatement technology that is used by firms: industries that use process-integrated technologies are more affected than those using end-of-pipe abatement technologies. The interaction between environmental policy and the evolution of the market structure is then studied. In particular, a reserve of pollution permits for new entrants is justified when the industry uses a process-integrated abatement technology, while a system with a preemption right may be justified in the case of end-of-pipe abatement technology.

Keywords: Cap-and-trade system, imperfect competition, abatement technologies

JEL Classification: L13, Q53, Q58

Suggested Citation

Christin, Clemence and Nicolai, Jean Philippe and Pouyet, Jerome, Pollution Permits, Imperfect Competition and Abatement Technologies (November 26, 2013). Available at SSRN: https://ssrn.com/abstract=2360018 or http://dx.doi.org/10.2139/ssrn.2360018

Clemence Christin

Université de Caen ( email )

F-14032 Caen Cedex
France

Jean Philippe Nicolai (Contact Author)

ETH Zürich ( email )

Zürichbergstrasse 18
8092 Zurich, CH-1015
Switzerland

Jerome Pouyet

Ecole Nationale des Ponts et Chaussées (ENPC) - Centre d'Enseignement et de Recherche en Analyse Socio-Economique (CERAS) ( email )

28, rue des Saints-Peres
75007 Paris
France
+33 1 4458 2870 (Phone)
+33 1 4458 2880 (Fax)

National Institute of Statistics and Economic Studies (INSEE) - Center for Research in Economics and Statistics (CREST)

15 Boulevard Gabriel Peri
Malakoff Cedex, 1 92245
France

Centre for Economic Policy Research (CEPR)

London
United Kingdom

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