Explaining low sulfur dioxide allowance prices : the effect of expectation errors and irreversibility
Author(s)
Montero, Juan-Pablo; Ellerman, A. Denny![Thumbnail](/bitstream/handle/1721.1/45085/98011.pdf.jpg?sequence=3&isAllowed=y)
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Other Contributors
Massachusetts Institute of Technology. Center for Energy and Environmental Policy Research.
Metadata
Show full item recordAbstract
The low price of allowances has been a frequently noted featured of the implementation of the sulfur dioxide emissions market of the U.S. Acid Rain Program. This paper presents theoretical and numerical analyses that explain the gap between expected and observed allowance prices. The main contributing factors appear to be expectation errors augmented by the presence of irreversible investments.
Date issued
1998Publisher
MIT Center for Energy and Environmental Policy Research
Other identifiers
98011
Series/Report no.
MIT-CEEPR (Series) ; 98-011WP.