Dynamics of optimal carbon prices with inter-temporal regulation
- Authors
- Yu, Jongmin
- Issue Date
- 2016
- Publisher
- EMERALD GROUP PUBLISHING LTD
- Keywords
- Climate change; Banking and borrowing; Cap and trade
- Citation
- INTERNATIONAL JOURNAL OF CLIMATE CHANGE STRATEGIES AND MANAGEMENT, v.8, no.1, pp.2 - 18
- Journal Title
- INTERNATIONAL JOURNAL OF CLIMATE CHANGE STRATEGIES AND MANAGEMENT
- Volume
- 8
- Number
- 1
- Start Page
- 2
- End Page
- 18
- URI
- https://scholarworks.bwise.kr/hongik/handle/2020.sw.hongik/8819
- DOI
- 10.1108/IJCCSM-03-2014-0040
- ISSN
- 1756-8692
- Abstract
- Purpose - This paper aims to calibrate carbon price trajectories that maximize social welfare where banking and borrowing rules are applied. Design/methodology/approach - Typically, there has been a consensus that banking and borrowing rules within the cap-and-trade system improve social welfare. This additional flexibility can achieve compliance cost smoothing by transferring carbon permits inter-temporally; however, there is also a side effect. Regulated agents have the freedom to escape from the given emissions limit by reallocating previously granted permits. Findings - The market system's flexibility can cause environmental damage by deviating annual or periodic emission limits, which can invalidate the original purpose of cap-and-trade. This paper demonstrates how the socially desirable price trajectory differs from the one that favors the private sector. Originality/value - Few studies have focused on the negative effects of combining the cap-and-trade with the inter-temporal regulation (banking and borrowing), which most policymakers and regulated firms can easily miss.
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Collections - School of Economics > Economics Major > 1. Journal Articles
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