Format:
1 Online-Ressource (31 p)
Series Statement:
World Bank E-Library Archive
Content:
This paper analyzes the dynamic effects of rate-of-return regulation on firms'emissions compliance behavior when the price of emissions permits is uncertain. The paper shows that uncertainty regarding the price of permits would motivate a regulated firm to adopt a more self-sufficient strategy and would reduce the cost-effectiveness of emission allowance trading. When allowance transactions are treated as capital investments, uncertainty could reverse the classic Averch-Johnson effect, so that a regulated firm would purchase fewer permits in the ex ante period than its unregulated counterpart. These results are driven by the asymmetric impact of a price change on the expected marginal value of allowances under rate-of-return regulation. A wider variation in the permit price and a decline in the regulated rate of return would amplify the asymmetry. These results have implications for the efficiency of the proposed global carbon trading system
Additional Edition:
Erscheint auch als Druck-Ausgabe Zhang, Fan Rate of Return Regulation and Emission Permits Trading under Uncertainty Washington, D.C : The World Bank, 2015
Language:
English
DOI:
10.1596/1813-9450-7343
URL:
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