Title: Moral considerations in trading pollution permits
Authors: Eyckmans, Johan
Kverndokk, S.
Issue Date: 2008
Publisher: HUB
Series Title: HUB research paper 2008/12 pages:1-32
Abstract: In this paper we investigate how moral considerations, modelled as identity effects, affects an endogenous pollution permit trading equilibrium, in which governments choose in a non-cooperative way the amount of permits they allocate to their domestic industries. Politicians might feel reluctant to allow unlimited permit trading and/or may prefer that abatement is undertaken domestically due to ethical motivation. However, once governments have chosen permit allocations, firms trade these permits in an international competitive permit market without moral restraints. We show that governments’ moral concerns may actually increase global emissions but this result depends on the precise formulation of the identity function. Finally, we explore how exogenous technological change affects endogenous permit trading equilibria under identity considerations. We show that decreasing costs of abatement technologies may lead countries to overcome their reluctance to trading emission permits.
Publication status: published
KU Leuven publication type: IR
Appears in Collections:Research Center of Energy, Transport and Environment, Leuven
Research Centre for Economics and Corporate Sustainability, Campus Brussels
Faculty of Economics and Business (FEB) - miscellaneous

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