Textbook Notes (368,432)
Canada (161,877)
Economics (1,074)
EC238 (54)
Karen Huff (33)
Chapter 13

Chapter 13 EC238.docx

2 Pages
91 Views
Unlock Document

Department
Economics
Course
EC238
Professor
Karen Huff
Semester
Fall

Description
EC238 Chapter 13 – Transferable Emission Permits Week 7 General Principles -A transferable emission permit creates a transferable property right to emit a specified amount of pollution -Each permit entitles its holder to emit one unit of the waste specified in the right -Right holders would ordinarily have a number of such permits at any point in time -These discharge permits are transferable; they can be bought and sold among anybody allowed to participate in the permit market, at whatever price is agreed upon by participants themselves -A TEP program begins with a specialized decision on the total number of discharge permits to be put into circulation -In actual TEP systems, the total number of permits is set at a target level that may be arbitrary because there is limited knowledge about either the MAC or MD curve -If the total number of permits is less than current total emissions, some or all of emitters will receive fewer permits than their current emissions -Gains from trade would continue to exist and permits would continue to be traded until marginal abatement costs are equalized -The TEP system operates like a hybrid between imposing standards and using taxation to reach a target -As long as marginal abatement costs are unequal among these sources, they can both become better off by trading permits at some price between these marginal abatement costs -When a large number of firms is involved, the TEP system works in the same way, but trading patterns will be more complicated -Key points about a TEP policy: -Like a standard, permits ensure that a target level of pollution is achieved -Like a tax, transferable permits that are traded in a competitive market are a cost-effective policy -Regulators do not have to know each polluter’s MAC curve to find the right “price” that achieves cost-effectiveness -Once the target level of pollution is set, the market will reveal a polluter’s MAC curve -Trading occurs if the MACs of polluters are sufficiently different so that some will become sellers of permits and the others, buyers -The exchange of permits provides each trader with cost savings compared to their initiate permit allocation from the regulator Issues in Setting up a TEP Market -The Initial Rights Allocation: -Each alloc
More Less

Related notes for EC238

Log In


OR

Join OneClass

Access over 10 million pages of study
documents for 1.3 million courses.

Sign up

Join to view


OR

By registering, I agree to the Terms and Privacy Policies
Already have an account?
Just a few more details

So we can recommend you notes for your school.

Reset Password

Please enter below the email address you registered with and we will send you a link to reset your password.

Add your courses

Get notes from the top students in your class.


Submit