The Dynamics of Pollution Permits

Posted: 12 Oct 2015

See all articles by Makoto Hasegawa

Makoto Hasegawa

Graduate School of Economics, Kyoto University

Stephen W. Salant

University of Michigan; Resources for the Future

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Date Written: October 2015

Abstract

We review the literature on bankable emissions permits that has developed over the last two decades. Most articles analyze either theoretical or simulation models. The theoretical literature considers the problem of minimizing the discounted sum of social costs and the possibility of decentralizing the solution through competitive permit markets. In some cases, authors do not explicitly consider pollution damages but instead assume that the planner’s goal is to minimize the discounted social cost of reducing cumulative emissions by a given amount. In other cases, authors do not explicitly consider an emissions reduction target but assume that the goal is to minimize the discounted sum of pollution damages and abatement costs. Simulations permit evaluation of alternative government policies under uncertainty. We conclude by pointing out directions for future work.

Suggested Citation

Hasegawa, Makoto and Salant, Stephen W., The Dynamics of Pollution Permits (October 2015). Annual Review of Resource Economics, Vol. 7, Issue 1, pp. 61-79, 2015, Available at SSRN: https://ssrn.com/abstract=2672298 or http://dx.doi.org/10.1146/annurev-resource-100913-012507

Makoto Hasegawa (Contact Author)

Graduate School of Economics, Kyoto University ( email )

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Kyoto, 606-8501
Japan

HOME PAGE: http://sites.google.com/view/makoto-hasegawa/

Stephen W. Salant

University of Michigan ( email )

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Resources for the Future ( email )

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