Tradable Emission Permits in a Federal System
26 Pages Posted: 21 Jul 2005
Date Written: June 2005
Abstract
A system of tradable permits in the standard setting is effective in attaining the policy objective with regard to pollution reduction at the least cost. This outcome is challenged in case of a tradable permit system in a federal state 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 of the system, under different institutional arrangements, through the initial allocation of permits
Keywords: tradable permits, trade bans, fiscal federalism
JEL Classification: H21, H23, Q00
Suggested Citation: Suggested Citation