Browsing by Subject "Emissions trading"

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  • Lappi, Pauli (2017)
    We study non-compliance in an emissions trading system in which firms may bank and borrow permits. We find a condition involving auditing probability that characterizes compliance and allows us to analyze the time paths of actual emissions, reported emissions and violations. We find two interesting time instants. At the first time instant, reported emissions begin to be lower than the actual emissions, and at the second time instant, the reported emissions become zero and the actual emissions become constant. The results indicate, among other things, that a given penalty scheme may fail to induce compliance over the whole planning interval, even though it achieves compliance over the initial stage.
  • Lappi, Pauli (2021)
    The formation and allocation of an emission quota are analyzed in a common agency framework with two stages. First, the principals lobby for the size of the aggregate quota. Second, the principals lobby for the individual slices of the quota. It is shown that the slices are allocated such that the marginal profits of the principals are equalized and that the size of the aggregate quota is either set at the efficient level characterized by the Samuelson's rule for public goods or distorted from that level. When the quota is distorted from the efficient level it is set such that the aggregate marginal profit is less than the marginal damage, resulting in an overallocation of individual and aggregate quotas. However, efficient level of the quota is obtained in a reasonable special case in which countries take the role of the principals. The results are extended to cover tradable emission permits.