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Intertemporal links in cap-and-trade schemes

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Intertemporal links in cap-and-trade schemes. / Slechten, Aurelie.
In: Journal of Environmental Economics and Management, Vol. 66, No. 2, 09.2013, p. 319-336.

Research output: Contribution to Journal/Magazine › Journal article › peer-review

Harvard

Slechten, A 2013, 'Intertemporal links in cap-and-trade schemes', Journal of Environmental Economics and Management, vol. 66, no. 2, pp. 319-336. https://doi.org/10.1016/j.jeem.2013.01.002

APA

Slechten, A. (2013). Intertemporal links in cap-and-trade schemes. Journal of Environmental Economics and Management, 66(2), 319-336. https://doi.org/10.1016/j.jeem.2013.01.002

Vancouver

Slechten A. Intertemporal links in cap-and-trade schemes. Journal of Environmental Economics and Management. 2013 Sept;66(2):319-336. doi: 10.1016/j.jeem.2013.01.002

Author

Slechten, Aurelie. / Intertemporal links in cap-and-trade schemes. In: Journal of Environmental Economics and Management. 2013 ; Vol. 66, No. 2. pp. 319-336.

Bibtex

@article{236f7bcb738c415a94713108ba090136,
title = "Intertemporal links in cap-and-trade schemes",
abstract = "In a two-period general equilibrium model, I study the effects of intertemporal emission permit trading in a cap-and-trade scheme when firms' investments in abatement have long-term effects. To meet their caps, firms optimally choose levels of trading and investment in each period by equalizing the marginal benefit of abatement to the marginal cost of abatement in each period. The fact that investments have long-term effects introduces new effects: investments in period 1 have both an additional benefit (the reduction of emissions in period 2) and an additional cost (the decrease in abatement opportunities in period 2). This changes the standard condition of equalization of marginal costs across periods for cost-effectiveness. Without intertemporal trading, some investments in period 1 are entirely driven by second-period abatement needs. In that case, allowing intertemporal trading may reduce investment in period 1 as some long-term investments are substituted by intertemporal permit trading. Descriptive evidence from the EU Emissions Trading System (ETS) illustrates this potential effect.",
keywords = "Cap-and-trade schemes, Emission trading, Abatements, Investment , Banking , Borrowing",
author = "Aurelie Slechten",
year = "2013",
month = sep,
doi = "10.1016/j.jeem.2013.01.002",
language = "English",
volume = "66",
pages = "319--336",
journal = "Journal of Environmental Economics and Management",
publisher = "Academic Press Inc.",
number = "2",

}

RIS

TY - JOUR

T1 - Intertemporal links in cap-and-trade schemes

AU - Slechten, Aurelie

PY - 2013/9

Y1 - 2013/9

N2 - In a two-period general equilibrium model, I study the effects of intertemporal emission permit trading in a cap-and-trade scheme when firms' investments in abatement have long-term effects. To meet their caps, firms optimally choose levels of trading and investment in each period by equalizing the marginal benefit of abatement to the marginal cost of abatement in each period. The fact that investments have long-term effects introduces new effects: investments in period 1 have both an additional benefit (the reduction of emissions in period 2) and an additional cost (the decrease in abatement opportunities in period 2). This changes the standard condition of equalization of marginal costs across periods for cost-effectiveness. Without intertemporal trading, some investments in period 1 are entirely driven by second-period abatement needs. In that case, allowing intertemporal trading may reduce investment in period 1 as some long-term investments are substituted by intertemporal permit trading. Descriptive evidence from the EU Emissions Trading System (ETS) illustrates this potential effect.

AB - In a two-period general equilibrium model, I study the effects of intertemporal emission permit trading in a cap-and-trade scheme when firms' investments in abatement have long-term effects. To meet their caps, firms optimally choose levels of trading and investment in each period by equalizing the marginal benefit of abatement to the marginal cost of abatement in each period. The fact that investments have long-term effects introduces new effects: investments in period 1 have both an additional benefit (the reduction of emissions in period 2) and an additional cost (the decrease in abatement opportunities in period 2). This changes the standard condition of equalization of marginal costs across periods for cost-effectiveness. Without intertemporal trading, some investments in period 1 are entirely driven by second-period abatement needs. In that case, allowing intertemporal trading may reduce investment in period 1 as some long-term investments are substituted by intertemporal permit trading. Descriptive evidence from the EU Emissions Trading System (ETS) illustrates this potential effect.

KW - Cap-and-trade schemes

KW - Emission trading

KW - Abatements

KW - Investment

KW - Banking

KW - Borrowing

U2 - 10.1016/j.jeem.2013.01.002

DO - 10.1016/j.jeem.2013.01.002

M3 - Journal article

VL - 66

SP - 319

EP - 336

JO - Journal of Environmental Economics and Management

JF - Journal of Environmental Economics and Management

IS - 2

ER -