The Temporal Efficiency of So2 Emissions Trading

MIT Center for Energy and Environmental Policy Research Working Paper No. 02-003

26 Pages Posted: 9 Dec 2002

See all articles by A. Denny Ellerman

A. Denny Ellerman

European University Institute - Robert Schuman Centre for Advanced Studies (RSCAS)

Juan-Pablo Montero

Massachusetts Institute of Technology (MIT) - Center for Energy and Environmental Policy Research (CEEPR); Pontifical Catholic University of Chile - Institute of Economics

Date Written: September 2002

Abstract

This paper provides an empirical evaluation of the temporal efficiency of the U.S. Acid Rain Program, which implemented a nationwide market for trading and banking sulfur dioxide (SO2) emission allowances. We first develop a model of efficient banking and select appropriate parameter values. Then, we use aggregate data from the first seven years of the Acid Rain Program, to assess the temporal efficiency of the observed banking behavior. We find that banking has been surprisingly efficient and we discuss why this finding disagrees with the common perception of excessive banking in this program.

Keywords: emissions trading, banking, acid rain, tradable permits

JEL Classification: L50, Q25, Q28

Suggested Citation

Ellerman, A. Denny and Montero, Juan-Pablo, The Temporal Efficiency of So2 Emissions Trading (September 2002). MIT Center for Energy and Environmental Policy Research Working Paper No. 02-003, Available at SSRN: https://ssrn.com/abstract=337142 or http://dx.doi.org/10.2139/ssrn.337142

A. Denny Ellerman (Contact Author)

European University Institute - Robert Schuman Centre for Advanced Studies (RSCAS) ( email )

Villa La Fonte, via delle Fontanelle 18
50016 San Domenico di Fiesole
Florence, Florence 50014
Italy

Juan-Pablo Montero

Massachusetts Institute of Technology (MIT) - Center for Energy and Environmental Policy Research (CEEPR) ( email )

One Amherst Street, E40-279
Cambridge, MA 02142
United States
+56 2 686 4322 (Phone)
+56 2 686 6472 (Fax)

HOME PAGE: http://www.mit.edu/people/jpmonter

Pontifical Catholic University of Chile - Institute of Economics ( email )

Vicuna Mackenna 4860
Santiago
Chile
+56 2 686 4322 (Phone)
+56 2 686 6472 (Fax)

HOME PAGE: http://www.mit.edu/people/jpmonter

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