EC238 Chapter Notes - Chapter 20: Economic Surplus
Document Summary
Chapter 20 emissions trading principles and application. Permits can be either auctioned or distributed without charge. The simple economics of the tep system show that: the tep system will affect product prices and quantities produced of ghg-intensive goods, producers and consumers will share in the burden of the system. There will be a loss of producer and consumer surplus, ignoring any of the benefits of ghg reductions: if permits are given away instead of auctioned, the loss of producer surplus can be greatly reduced. Consumer surplus losses are unaffected: if permits are auctioned, governments could recycle the revenue in the form of tax cuts to offset some losses. Credit trading credits are given to polluters from documenting a reduction in emissions baseline- and-credit system. Substance trading allows for the trading of permits denominated in units of the polluting substance.
