Multipollutant markets
I study the optimal design of marketable permit systems to regulate various pollutants (e.g. air pollution in urban areas) when the regulator lives in a real world of imperfect information and incomplete enforcement. I show that the regulator should have pollution markets integrated through optimal...
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| Format: | Working Paper |
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MIT Center for Energy and Environmental Policy Research
2009
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| Online Access: | http://hdl.handle.net/1721.1/44980 |
| Summary: | I study the optimal design of marketable permit systems to regulate various pollutants (e.g. air pollution in urban areas) when the regulator lives in a real world of imperfect information and incomplete enforcement. I show that the regulator should have pollution markets integrated through optimal exchange rates when the marginal abatement cost curves in the different markets are steeper than the marginal benefit curves; otherwise he should keep markets separated. I also find that incomplete enforcement reduces the advantage of market integration. |
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