The Economics of Pollution Trading and Pricing under Regulatory Uncertainty
In this paper, authors explore the effects of uncertainty on pricing of pollution permits, through the use of a dynamic model of pollution markets. Authors consider two major sources of uncertainty - that arising from the volatility of demand for t...
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| Format: | Working Paper |
| Language: | English en_US |
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World Bank, Washington, DC
2017
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| Online Access: | http://documents.worldbank.org/curated/en/234491468061732523/The-economics-of-pollution-trading-and-pricing-under-regulatory-uncertainty http://hdl.handle.net/10986/27359 |
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okr-10986-273592021-04-23T14:04:41Z The Economics of Pollution Trading and Pricing under Regulatory Uncertainty Knudsen, Odin K. Scandizzo, Pasquale L. ACCOUNTING ADMINISTERED PRICE ASSET VALUE BID CALL OPTION CARBON EMISSION CARBON TRADING COMPETITIVE ADVANTAGE CONTINGENT LIABILITY DERIVATIVE EMISSIONS TRADING ENERGY PRICES ENFORCEMENT MECHANISMS ENVIRONMENTAL BENEFIT EQUILIBRIUM PRICE EXPECTED PRESENT VALUE EXPENDITURE HOLDING INDUSTRIAL SECTOR INSTRUMENT INTEREST RATE JUDICIAL SYSTEM LAW ENFORCEMENT MARGINAL COSTS MARKET BEHAVIOR MARKET DEMAND MARKET EQUILIBRIUM MARKET INSTRUMENTS MARKET PRICE MARKET SHARE NATURAL RESOURCE OPPORTUNITY COSTS OUTPUT POLLUTER POLLUTION POTENTIAL DEMAND POWER UTILITIES PROFIT MAXIMIZING PUBLIC POLICY REGULATOR REGULATORY ENVIRONMENT REGULATORY REGIME SINGLE MARKET SPREAD TAX TAX RATE TRADING SYSTEM TRANSACTION TRANSACTION COSTS UNDERLYING ASSET VOLATILITY In this paper, authors explore the effects of uncertainty on pricing of pollution permits, through the use of a dynamic model of pollution markets. Authors consider two major sources of uncertainty - that arising from the volatility of demand for the underlying resource and that coming from the regulatory environment. Both sources of uncertainty are common in pollution permit trading as not only does the market respond to the volatility of fundamentals but also to the vagaries of the institutional structure, created by public policy and enforced through regulation. The paper shows that even in the presence of strategic behavior on the part of the agents involved, the trading of permits effectively reduces emissions, and pricing does reflect opportunity costs and environmental objectives. Furthermore, and somewhat paradoxically, the higher uncertainty, the greater the impact of regulation. 2017-06-27T18:13:31Z 2017-06-27T18:13:31Z 2011 Working Paper http://documents.worldbank.org/curated/en/234491468061732523/The-economics-of-pollution-trading-and-pricing-under-regulatory-uncertainty http://hdl.handle.net/10986/27359 English en_US CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo World Bank World Bank, Washington, DC Publications & Research :: Working Paper Publications & Research Middle East and North Africa Morocco |
| repository_type |
Digital Repository |
| institution_category |
Foreign Institution |
| institution |
Digital Repositories |
| building |
World Bank Open Knowledge Repository |
| collection |
World Bank |
| language |
English en_US |
| topic |
ACCOUNTING ADMINISTERED PRICE ASSET VALUE BID CALL OPTION CARBON EMISSION CARBON TRADING COMPETITIVE ADVANTAGE CONTINGENT LIABILITY DERIVATIVE EMISSIONS TRADING ENERGY PRICES ENFORCEMENT MECHANISMS ENVIRONMENTAL BENEFIT EQUILIBRIUM PRICE EXPECTED PRESENT VALUE EXPENDITURE HOLDING INDUSTRIAL SECTOR INSTRUMENT INTEREST RATE JUDICIAL SYSTEM LAW ENFORCEMENT MARGINAL COSTS MARKET BEHAVIOR MARKET DEMAND MARKET EQUILIBRIUM MARKET INSTRUMENTS MARKET PRICE MARKET SHARE NATURAL RESOURCE OPPORTUNITY COSTS OUTPUT POLLUTER POLLUTION POTENTIAL DEMAND POWER UTILITIES PROFIT MAXIMIZING PUBLIC POLICY REGULATOR REGULATORY ENVIRONMENT REGULATORY REGIME SINGLE MARKET SPREAD TAX TAX RATE TRADING SYSTEM TRANSACTION TRANSACTION COSTS UNDERLYING ASSET VOLATILITY |
| spellingShingle |
ACCOUNTING ADMINISTERED PRICE ASSET VALUE BID CALL OPTION CARBON EMISSION CARBON TRADING COMPETITIVE ADVANTAGE CONTINGENT LIABILITY DERIVATIVE EMISSIONS TRADING ENERGY PRICES ENFORCEMENT MECHANISMS ENVIRONMENTAL BENEFIT EQUILIBRIUM PRICE EXPECTED PRESENT VALUE EXPENDITURE HOLDING INDUSTRIAL SECTOR INSTRUMENT INTEREST RATE JUDICIAL SYSTEM LAW ENFORCEMENT MARGINAL COSTS MARKET BEHAVIOR MARKET DEMAND MARKET EQUILIBRIUM MARKET INSTRUMENTS MARKET PRICE MARKET SHARE NATURAL RESOURCE OPPORTUNITY COSTS OUTPUT POLLUTER POLLUTION POTENTIAL DEMAND POWER UTILITIES PROFIT MAXIMIZING PUBLIC POLICY REGULATOR REGULATORY ENVIRONMENT REGULATORY REGIME SINGLE MARKET SPREAD TAX TAX RATE TRADING SYSTEM TRANSACTION TRANSACTION COSTS UNDERLYING ASSET VOLATILITY Knudsen, Odin K. Scandizzo, Pasquale L. The Economics of Pollution Trading and Pricing under Regulatory Uncertainty |
| geographic_facet |
Middle East and North Africa Morocco |
| description |
In this paper, authors explore the
effects of uncertainty on pricing of pollution permits,
through the use of a dynamic model of pollution markets.
Authors consider two major sources of uncertainty - that
arising from the volatility of demand for the underlying
resource and that coming from the regulatory environment.
Both sources of uncertainty are common in pollution permit
trading as not only does the market respond to the
volatility of fundamentals but also to the vagaries of the
institutional structure, created by public policy and
enforced through regulation. The paper shows that even in
the presence of strategic behavior on the part of the agents
involved, the trading of permits effectively reduces
emissions, and pricing does reflect opportunity costs and
environmental objectives. Furthermore, and somewhat
paradoxically, the higher uncertainty, the greater the
impact of regulation. |
| format |
Working Paper |
| author |
Knudsen, Odin K. Scandizzo, Pasquale L. |
| author_facet |
Knudsen, Odin K. Scandizzo, Pasquale L. |
| author_sort |
Knudsen, Odin K. |
| title |
The Economics of Pollution Trading and Pricing under Regulatory Uncertainty |
| title_short |
The Economics of Pollution Trading and Pricing under Regulatory Uncertainty |
| title_full |
The Economics of Pollution Trading and Pricing under Regulatory Uncertainty |
| title_fullStr |
The Economics of Pollution Trading and Pricing under Regulatory Uncertainty |
| title_full_unstemmed |
The Economics of Pollution Trading and Pricing under Regulatory Uncertainty |
| title_sort |
economics of pollution trading and pricing under regulatory uncertainty |
| publisher |
World Bank, Washington, DC |
| publishDate |
2017 |
| url |
http://documents.worldbank.org/curated/en/234491468061732523/The-economics-of-pollution-trading-and-pricing-under-regulatory-uncertainty http://hdl.handle.net/10986/27359 |
| _version_ |
1764464217525583872 |