EMISSION PERMITS TRADING AND DOWNSTREAM STRATEGIC MARKET INTERACTION

• Type: Article in International Scientific Journal
• Date: 2013

Authors

De Feo, G (Author) Other; Joana Resende (Author) FEP; Sanin, ME (Author) Other

Journal

Title: Manchester School

Vol. 81 No. 5

Pages: 780-802

ISSN: 1463-6786

Publisher: Wiley-Blackwell

Indexing

ISI Web of Knowledge - 10 Citations

Scopus - 11 Citations

Other information

Authenticus ID: P-006-7Z4

DOI: 10.1111/j.1467-9957.2012.02310.x

Abstract (EN): This paper studies inefficiencies arising in oligopolies subject to environmental regulation based on tradable emission permits. We propose a duopoly model of upstream-downstream strategic competition: in the permits market a leader sets the price, whereas in the output market Cournot competition occurs. We find that strategic interaction in the output market gives rise to an additional distortion in the permits market where both firms adopt rival's cost-rising' strategies to gain a competitive advantage in the output market. As a result, the price of permits is always higher than firms' marginal abatement costs.

Language: English

Type (Professor's evaluation): Scientific

No. of pages: 23