The Economics of Pollution Trading and Pricing under Regulatory Uncertainty

Knudsen, Odin K. ; Scandizzo, Pasquale L.

World Bank, Washington, DC

关键词: ACCOUNTING;    ADMINISTERED PRICE;    ASSET VALUE;    BID;    CALL OPTION;   

RP-ID  :  62488

学科分类：社会科学、人文和艺术（综合）

来源: World Bank Open Knowledge Repository

【 摘 要 】

In this paper, authors explore theeffects of uncertainty on pricing of pollution permits,through the use of a dynamic model of pollution markets.Authors consider two major sources of uncertainty - thatarising from the volatility of demand for the underlyingresource and that coming from the regulatory environment.Both sources of uncertainty are common in pollution permittrading as not only does the market respond to thevolatility of fundamentals but also to the vagaries of theinstitutional structure, created by public policy andenforced through regulation. The paper shows that even inthe presence of strategic behavior on the part of the agentsinvolved, the trading of permits effectively reducesemissions, and pricing does reflect opportunity costs andenvironmental objectives. Furthermore, and somewhatparadoxically, the higher uncertainty, the greater theimpact of regulation.