Emissions Permits Markets and Dominant Firms
- Manel Antelo 1
- Lluis Bru 2
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1
Universidade de Santiago de Compostela
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2
Universitat de les Illes Balears
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ISSN: 1138-0713
Ano de publicación: 2004
Número: 31
Páxinas: 1-40
Tipo: Documento de traballo
Outras publicacións en: Documentos de Traballo. Análise Económica
Resumo
In this paper, the implementation of some schemes proposed in the literature for allocating emissions permits among pollutant firms, given a cap on total national emissions, is examined in the context of firms exerting market power in the (intermediate) emissions permits market. For that, we propose a partial equilibrium analysis with a government, consumers, and firms -one firm being a dominant firm with market power in the intermediate emissions permits market, and the rest of firms being competitive in such market. We find that the presence of a dominant firm in the intermediate emissions permits market generates an additional externality, and that a secondary market of emissions permits (in addition to a previous auction) does not solve such inefficiency. The context in which the dominant firm is "removed from the emissions permits market" by a (tax collector) government to obtain its permits through bilateral bargaining with the government rather than through the market is also explored.