Do Permit Allocations Matter?

Verbon, Harrie A. A.; Withagen, Cees

doi:10.2139/ssrn.1705965

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Do Permit Allocations Matter?

CESifo Working Paper Series No. 3236

19 Pages Posted: 10 Nov 2010

See all articles by Harrie A. A. Verbon

Harrie A. A. Verbon

Tilburg University - CentER; CESifo (Center for Economic Studies and Ifo Institute)

Cees Withagen

Free University of Amsterdam; Tilburg University

Date Written: November 9, 2010

Abstract

In the standard setting a system of tradable permits is effective and cost-efficient in attaining the policy objective of pollution reduction. This outcome is challenged in case of a tradable permit system in a federal system/constitution with individual states having discretionary power regarding environmental policy and where pollution is transboundary across states. This paper explores the opportunities of the central authority to influence the effectiveness and efficiency of the system, under various institutional arrangements, through the initial allocation of permits.

Keywords: tradable permits, fiscal federalism

JEL Classification: H21, H23, Q00

Suggested Citation: Suggested Citation

Verbon, Harrie A. A. and Withagen, Cees A. M., Do Permit Allocations Matter? (November 9, 2010). CESifo Working Paper Series No. 3236, Available at SSRN: https://ssrn.com/abstract=1705965 or http://dx.doi.org/10.2139/ssrn.1705965