Among the many reasons policy makers across the world have sought to supplement fuel supplies with ethanol-blended fuels are the cited environmental benefits that come with replacing a fossil-fuel with a cleaner burning alternative. Dual-blend ethanol mandates, in which multiple ethanol blends...

If emissions are stochastic and firms are unable to control them through abatement, the cap in a permit market may be exceeded, or not be reached. I derive a binary options pricing formula that expresses the permit price as a function of the penalty for noncompliance and the probability of an...