The Design of a Dynamic Tradeable quota System under Market Imperfections

摘要

Market power within a dynamic system of tradeable quotas with banking and borrowing of quotas leads to a nonoptimal distribution of abatement across agents. In this paper we introduce a quota system that may reduce the efficiency loss from market power and thereby result in a distribution of abatement across agents that is closer to a cost-effective outcome. However, this system will in general lead to a nonoptimal distribution of abatement across Periods. Hence, we may face a trade-off between a cost-effective distribution of abatement Across periods and reduced adverse effects of market power