Work

Carbon allowance allocation rules under emission intensity regulation: Grandfathering versus benchmarking

Year: 2023

Type: article

Abstract: This paper compares the impacts of grandfathering and benchmarking rules on firms' operating decisions, consumer surplus, and social welfare with different emission intensity limits. The findings suggest that with tight emission intensity limits, grandfathering rules are more effective in controlling carbon emissions and enhancing social welfare. Benchmarking rule with relaxed emission intensity can incentivize firms to increase output, lower product prices, and increase consumer surplus. Under relaxed intensity regulation, grandfathering rule can encourage more potential entrants to participate in the product market, and benchmarking rule can motivate firms to take more outputs, resulting higher consumer surplus and more carbon emissions.

Source: Managerial and Decision Economics

DOI: 10.1002/mde.3870

Authors: Zhao‐Yong Sun, Yu‐Jue Wang, Dongdong Li

Institutions: Xi'an University of Technology, Northwestern Polytechnical University

Language: English

Topic: Climate Change Policy and Economics

Subfield: Economics and Econometrics

Field: Economics, Econometrics and Finance

Domain: Social Sciences

SDG: Climate action

Open Access status: bronze

Funder: China Scholarship Council