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| Author: | Liski, M. Montero, J. |
| Title: | Market power in an exhaustible resource market: the case of storable pollution permits |
| Journal: | Economic Journal
2011 : MAR, VOL 121:551 p. 116-144 |
| Index terms: | pollution markets power welfare trade |
| Freeterms: | emission Kyoto Protocol carbon |
| Language: | eng |
| Abstract: | This is a study of existing pollution markets and equilibrium path that results from allocating an initial stock of storable permits to an agent, in a position to exercise market power. A large seller of permits exercises market power no differently than a large supplier of an exhaustible resource. However, whenever the large agent's endowment falls short of his efficient endowment - allocation profile that would exactly cover his emissions along the perfectly competitive path - market power is greatly mitigated by a commitment problem, much like in a durable-goods monopoly. The theory of the writers is illustrated with two applications: the US sulphur market and the international carbon market that may eventually develop beyond the Kyoto Protocol. |
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