We assume that a project requires an initial outlay and may either succeed or fail. The probability of success depends on its type and on the effort of the firm. Only in the case of success do private and external benefits appear. The paper analyzes the optimal design of subsidies under...

This paper explores the idea that a properly designed sectoral approach could be the answer to two sets of constraints that hinder international agreements on climate change, namely a genuine concern from developing countries for economic growth and competitiveness issues from industrialized...

This paper investigates incentives for firms to increase output above the activity level thresholds (ALTs) in order to obtain more free allowances in the EU Emissions Trading Scheme. While ALTs were introduced in order to reduce excess free allocation to low-activity installations, for...

Competitiveness and carbon leakage are major concerns for the design of CO2 emissions permits markets. In the absence of a global carbon tax and of border carbon adjustments, output-based allocation is a third-best solution and is actually implemented (Australia, California, New Zealand). The EU...

This paper develops the idea of forward induction in the context of increasing returns. The situation is modeled as a game of entry with a fixed cost and no marginal cost. The recursive equations that provide the solution of the infinitely repeated game are determined and solved for various cost...