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| Tekijä: | Liski, M. |
| Otsikko: | Thin versus thick CO2 market |
| Lehti: | Journal of Environmental Economics and Management
2001 : MAY, VOL. 41:3, p. 295-311 |
| Asiasana: | Environmental economics Pollution Climate Econometric models New international economic order |
| Kieli: | eng |
| Tiivistelmä: | The idea that trading is more costly the thinner the market is common in most studies of market exchange with frictions. This element is lacking from previous attempts to allow for frictions in pollution permit markets. This paper considers a CO2 cap-and-trade model where trading costs develop endogenously as a funtion of the market size. The pre-trade allocation of permits determines whether the market size can be strongly influenced by expectations that have a role because of adjustment costs. The pre-trade allocation also sets preconditions for endogenously vanishing trading costs and thus has nonstandard effects on long-run trading levels and market allocations. |
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