A note on market power in an emission permits market with banking
Name
2004-005.pdf
Size
263.37 KB
Format
Adobe PDF
Checksum (MD5)
c4ff5a73a04f15a40838b508a8d1e481
Author(s)
Liski, Matti
Montero, Juan-Pablo
Date Issued
2004
Publisher
MIT Center for Energy and Environmental Policy Research
Series/Report no.
MIT-CEEPR (Series) ; 04-005WP.
Abstract
In this paper, we investigate the effect of market power on the equilibrium path of an emission permits market in which firms can bank current permits for use in later periods. In particular, we study the market equilibrium for a large (potentially dominant) firm and a competitive fringe with rational expectations. We characterize the equilibrium solution for different permits allocations. We find, for example, that if the large firm enjoys a dominant position in the after-banking market, this position gets extended to the market during the banking period regardless of the allocation of the stock (bank) of permits.
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