skip to content

Faculty of Economics

Journal Cover

Ritz, R. A., Hepburn, C.J. and Quah, K.-H.

Emissions trading with profit-neutral permit allocations.

Journal of Public Economics

Vol. 98 pp. 85-99 (2013)

Abstract: This paper examines the impact of an emissions trading scheme (ETS) on equilibrium emissions, output, price, market concentration, and profits in a generalized Cournot model. We develop formulae for the number of emissions permits that have to be freely allocated to firms to neutralize the profit impact of the ETS. We show that its profit impact is usually limited: in a Cournot oligopoly with constant marginal costs, total industry profits are preserved so long as freely allocated permits cover a fraction of initial emissions that does not exceed the industry's Herfindahl index

JEL Codes: D43, H23, Q58

Author links: Robert Ritz  

Publisher's Link: http://dx.doi.org/10.1016/j.jpubeco.2012.10.004



Papers and Publications



Recent Publications


Bhattacharya, D., Dupas, P. and Kanaya, S. Demand and Welfare Analysis in Discrete Choice Models with Social Interactions Review of Economic Studies [2023]

Elliott, M., Golub, B. and Leduc, M. V. Supply Network Formation and Fragility American Economic Review [2022]

Rauh, C. and Valladares-Esteban, A. On the Black-White Gaps in Labor Supply and Earnings over the Lifecycle in the US Review of Economic Dynamics [2023]

Chen, J., Elliott, M. and Koh, A. Capability Accumulation and Conglomeratization in the Information Age Journal of Economic Theory [2023]