Market power in emissions trading: Strategically manipulating permit price through fringe firms

2012 ◽  
Vol 96 ◽  
pp. 203-211 ◽  
Author(s):  
Makoto Tanaka ◽  
Yihsu Chen
Keyword(s):  
Market Power ◽  
Emissions Trading ◽  
Permit Price

scholarly journals Market Power in Output and Emissions Trading

Games ◽  
2020 ◽  
Vol 11 (4) ◽  
pp. 43
Author(s):  
Francisco J. André ◽  
Luis Miguel de Castro
Keyword(s):  
Market Power ◽  
Emissions Trading ◽  
Strategic Behavior ◽  
Cournot Model ◽  
Ceteris Paribus ◽  
Dominant Firm ◽  
Initial Allocation ◽  
Permit Price ◽  
Permit Allocation ◽  
Output Market

This article focuses on the strategic behavior of firms in the output and the emissions markets in the presence of market power. We consider the existence of a dominant firm in the permit market and different structures in the output market, including Cournot and two versions of the Stackelberg model, depending on whether the permit dominant firm is a leader or a follower in the output market. In all three models, the firm that dominates the permit market is more sensitive to its initial allocation than its competitor in terms of abatement and less sensitive in terms of output. In all three models, output is decreasing and the permit price is increasing in the permit dominant firm’s initial allocation. In the Cournot model, permit dominance is fruitless in terms of output and profit if the initial allocation is symmetric. Output leadership is more relevant than permit dominance since an output leader always tends to, ceteris paribus, produce more and make more profit whether it also dominates the permit market or not. This leadership can only be overcompensated for by distributing a larger share of permits to the output follower, and only if the total number of permits is large enough. In terms of welfare, Stackelberg is always superior to Cournot. If the initial permit allocation is symmetric, welfare is higher when the same firm dominates the output and the permit market at the same time.

scholarly journals Low-carbon innovation induced by emissions trading in China

2019 ◽  
Vol 10 (1) ◽  
Author(s):  
Junming Zhu ◽  
Yichun Fan ◽  
Xinghua Deng ◽  
Lan Xue
Keyword(s):  
Emissions Trading ◽  
Low Carbon ◽  
Firm Characteristics ◽  
Firm Level ◽  
Permit Price ◽  
National Market ◽  
Allowance Allocation ◽  
Quasi Experimental ◽  
Price Auction ◽  
Trading Scheme

Abstract Emissions trading scheme (ETS) has been adopted by an increasing number of countries and regions for carbon mitigation, but its actual effect depends on specific program design and institutional context. Before launching the world largest ETS, China experimented with seven independent regional pilots, whose effects are only indirectly explored. Here we provide firm-level evidence of the innovation effect directly from China’s pilot emissions trading, based on latest patenting information and a quasi-experimental design. China’s pilots increase low-carbon innovation of ETS firms by 5–10% without crowding out their other technology innovation. The increase from ETS firms accounts for about 1% increase of the regional low-carbon patents, while a similar increase from large non-ETS firms is also induced by the ETS. Most importantly, the effect is not associated with permit price, auction, or firm characteristics, but is driven by mass-based allowance allocation. A rate-based approach, however, is adopted by China’s national market.

scholarly journals The Equilibrium Model for the Coexistence of Renewable Portfolio Standards and Emissions Trading: The Supply Chain Analysis

Energies ◽  
2019 ◽  
Vol 12 (3) ◽  
pp. 439 ◽  
Author(s):  
Wenhui Zhao ◽  
Xiongjiantao Bao ◽  
Guanghui Yuan ◽  
Xiaomei Wang ◽  
Hongbo Bao
Keyword(s):  
Supply Chain ◽  
Emissions Trading ◽  
Environmental Awareness ◽  
Thermal Power ◽  
Supply Chain Network ◽  
Renewable Portfolio Standards ◽  
Compliance Cost ◽  
Renewable Power ◽  
Permit Price ◽  
Supply Chain Analysis

China will impose both renewable portfolio standards (RPS) and emissions trading (ET) on the electricity industry, but the product competition in the retail market and the influence of the supply chain network structure has not been investigated. This paper studies policy effects by comparing equilibrium results under different supply chain network structures, and we use the concept of consumer environmental awareness to capture a product’s substitutability. Results indicate that: (1) Both increases in the permit price and the rise of the quota obligation reduces the aggregate profits of the supply chain, but the former rather than the latter increases the profits of the renewable power generating company; (2) the differential pricing improves the retailer’s flexibility in the charged price when confronting increases in the permit price and the quota obligation; (3) higher consumer environmental awareness makes the supply chain less profitable and increases the costs of ET suffered by the consumer; (4) the cooperation between the thermal power generating company and the retailer significantly increases the aggregated profits of the supply chain, although the cooperative profit is sensitive to environmental awareness. Moreover, the consumer suffers the highest costs that the retailer passes on them, and may prefer to feel that the emission cost and compliance cost are less affordable. In contrast, the cooperation between power generating companies removes the influence of environmental awareness, but the aggregated profits of the supply chain are smaller than in the decentralized decision scenario.

Potential anti-competitive effects of emission permit markets – A survey on theoretical findings and evidence

2013 ◽  
Vol 64 (3) ◽  
Author(s):  
Johanna Reichenbach ◽  
Till Requate
Keyword(s):  
Market Power ◽  
Pollution Control ◽  
Emissions Trading ◽  
Emission Trading ◽  
Competitive Effects ◽  
Market Abuse ◽  
Competitive Disadvantage ◽  
Output Market ◽  
Emission Permit Markets ◽  
Power Utilities

AbstractEmissions trading has been established as an important instrument of pollution control in many world regions. However concerns have been raised whether or not emission-trading schemes may distort competition either on the permit market itself or on related output markets. In this paper we review tradable emission-allowance schemes with special reference to anti-competitive effects. Such distortions may be caused by large firms exercising market power on the allowance market by holding down supply or suppressing demand in order to manipulate prices to their advantage. Firms may also try to abuse the allowance market to put other firms, with whom they compete on the output market, at a competitive disadvantage. Further distortions and abuses may be caused by special or ill-defined rules on the allowance market or other markets. In this paper we survey theoretical insights on potential anti-comptitive effects of emissions trading and also provide some empirical evidence for market power abuses on auctioned and grandfathered allowance markets with a particular focus on the (alleged) allowance market abuse by power utilities in Germany and California.

Sign in / Sign up

Export Citation Format

Share Document