CERE Working Papers,
CERE - the Center for Environmental and Resource Economics

Abstract: There is no consensus with respect to handling of tradable permits in cost–benefit analysis. The leading (organizational/governmental) manuals in North America, Europe, Asia, and Australia handle permits in different ways or ignore them. This paper offers a brief discussion of the properties of cap-and-trade systems, and contrast these to the properties of emission charges. The paper then turns to cost–benefit rules for projects using fossil fuels in a cap-and-trade system. The focus is on small projects but the paper also briefly addresses the case where a project significantly affect prices. As a service to the reader the small project rules are contrasted to the much more familiar and standardized ways of handling emission charges in cost–benefit analysis. Finally, the consequences of market power in cap-and-trade markets are briefly addressed.

Keywords: Cost–benefit analysis; greenhouse gases; tradable permits; emission charges; market power.

JEL-codes: H21; H23; H41; H43; I30; L13

29 pages, November 7, 2015

Full text files

694-tradable-permits-in-cost-benefit-analysis.html  

Download statistics

• CERE - the Center for Environmental and Resource Economics
• Home page for this series

Questions (including download problems) about the papers in this series should be directed to Mona Bonta Bergman ()
Report other problems with accessing this service to Sune Karlsson ().

RePEc:hhs:slucer:2015_011This page generated on 2024-09-13 22:17:06.