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| Author: | Caplan, A. J. Silva, E. C. D. |
| Title: | An efficient mechanism to control correlated externalities: redistributive transfers and the coexistence of regional and global pollution permit markets |
| Journal: | Journal of Environmental Economics and Management
2005 : JAN, VOL. 49:1, p. 68-82 |
| Index terms: | externalities pareto law pollution |
| Language: | eng |
| Abstract: | This paper discusses joint tradable permit markets as a self-enforcing mechanism to control correlated externality problems. By "correlated" we mean multiple pollutants that are jointly produced by a single source but which simultaneously cause differentiated regional and global externalities (e.g. smog and global warming). By "self-enforcing" we mean a mechanism that accounts for the endogeneity that exists between competing jurisdictions in the setting of environmental policy within a federation of regions. It is found that joint domestic and international permit markets are Pareto efficient for a wide class of preferences. |
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