This paper examines the investment strategies of regulated companies in abatement technologies, market participants' trading behaviors, and the liquidity level in an inter-temporal cap{and{trade market using laboratory experiments. The experimental analysis is performed under varying market...

This paper analyzes the dynamic incentives for technology adoption under a transferable permits system, which allows for strategic trading on the permit market. Initially, firms can invest both in low-emitting production technologies and trade permits. In the model, technology adoption and...

We construct two simple examples that help to clarify the role of a key assumption in the analysis of price or quantity controls of greenhouse gases in the presence of uncertain costs. Traditionally much has been made of the fact that greenhouse gases are a stock pollutant, and that therefore...

The paper analyses the implications of landowners’ option values in land allocation and derives policy recommendations for payments for Reducing Emissions from Deforestation and Forest Degradation (REDD). Given that REDD will not represent a permanent change in the cumulative flux of carbon...

This paper reviews fundamental concepts in environmental economics and explores theoretical results regarding the choice of the key policy instruments for the control of externalities: taxes, subsidies and marketable permits. The paper explains why today market mechanisms are increasingly being...

Equilibrium models have been proposed in literature with the aim of describing the evolution of the price of emission permits. This paper derives first a reducedform model from an equilibrium model and thereby explains how existing reducedform models are related to equilibrium models. Second, by...

This paper examines the key design mechanisms of existing and proposed cap-and-trade markets. First, it is shown that the hybrid systems under investigation (price floor using a minimum price guarantee, price collar, allowance reserve, options offered by the regulator, and offset relaxation) can...