Environmental policy and speculation on markets for emission permits
Year: 2005
Type: preprint
Abstract: Tradable emission permits share many characteristics with financial assets. As on financial markets, speculators are likely to be active on large markets for emission permits such as those developing under the Kyoto Protocol. We show how the presence of speculators on a market for emission permits affects the price of these permits when firms face risk aversion. The agency in charge of the optimal environmental policy should account for the presence of speculators when determining the total amount of permits to issue.
Authors: Paolo Colla, Marc Germain, Vincent van Steenberghe
Institutions: Bocconi University, Université de Lille, UCLouvain
Language: English
Subfield: Economics and Econometrics
Domain: Social Sciences
Open Access status: green
OpenAlex ID: W3125901265