Rabotyagov, Sergey S.; Feng, Hongli; Kling, Catherine L. - Agricultural and Applied Economics Association - AAEA - 2006
The optimal pollution permit trading system is examined when the regulator, faced with incomplete information on firms …' abatement costs and delivery coefficients, seeks to minimize expected total abatement costs to meet an ex ante pollution target …. Intuitively, we find that the optimal trading ratio and permit cap are set such that there will be more pollution when abatement …