Please use this identifier to cite or link to this item: http://hdl.handle.net/1893/11728
Appears in Collections:Economics Journal Articles
Peer Review Status: Refereed
Title: The effects of rent seeking over tradable pollution permits
Authors: Hanley, Nicholas
Mackenzie, Ian A
Contact Email: n.d.hanley@stir.ac.uk
Keywords: tradable permit market
rent seeking
initial allocation
Issue Date: Jul-2010
Publisher: Walter de Gruyter / Berkeley Electronic Press
Citation: Hanley N & Mackenzie IA (2010) The effects of rent seeking over tradable pollution permits, BE Journal of Economic Analysis and Policy, 10 (1 (Article 56)).
Abstract: The establishment of a tradable permit market requires the regulator to select a level of aggregate emissions and then distribute the associated permits to specific groups. Both these decisions create opportunities for rent seeking. In this paper, we use a contest model to analyse the incentives to rent seek for pollution permits and to analyse the consequences for social welfare. We find differences in firms' rent-seeking choices compared to a conventional rent-seeking contest. We see that a fundamental aspect of firms' incentives to rent seek depends on the market value of the permits, that is, the value of the ex post reallocated rents. This impact depends on the responsiveness of the regulator to aggregate rent-seeking effort. The responsiveness, in some cases, may improve welfare by reducing the per-unit value of permits, which may lower the rent-seeking effort more than it increases the damages experienced from the additional emissions.
Type: Journal Article
URI: http://hdl.handle.net/1893/11728
DOI Link: http://dx.doi.org/10.2202/1935-1682.2497
Rights: Publisher allows this work to be made available in this repository. Published in B.E. Journal of Economic Analysis & Policy, Volume 10, Issue 1, DOI: 10.2202/1935-1682.2497, July 2010 by Walter de Gruyter GmbH/ Walter de Gruyter, Inc with the following policy: the Author/Editor may deposit the Publisher's PDF version of the Article on Author's/Editor's own website or Author's/Editor's institute's designated repository, provided it is not made publicly available until 12 months after official publication. The final publication is available at www.degruyter.com
Affiliation: Economics
ETH Zurich

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