The assessment of climate change mitigation policies through economic modeling depends crucially on assumptions under which technological change has been incorporated in the model. Earlier climate-energy-economics modeling attempts heavily relied on the assumption of exogenous technological...

As shown by R. Hahn [6], free allocation equal to the amount of permits a firm with market power uses in equilibrium, can prevent welfare losses. If the necessary amount of free allocation is not provided to the firm with market power, a second best solution is obtained where marginal abatement...