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Appears in Collections:Economics Journal Articles
Peer Review Status: Refereed
Title: Dynamic Efficiency in Experimental Emissions Trading Markets with Investment Uncertainty
Author(s): Cason, Timothy N
de Vries, Frans
Keywords: Pollution permits
Allowance auction
Investment incentives
Stochastic R&D
Laboratory experiments
Issue Date: May-2019
Date Deposited: 16-Apr-2018
Citation: Cason TN & de Vries F (2019) Dynamic Efficiency in Experimental Emissions Trading Markets with Investment Uncertainty. Environmental and Resource Economics, 73 (1), pp. 1-31.
Abstract: This study employs a laboratory experiment to assess the performance of tradable permit markets on dynamic efficiency arising from cost-reducing investment. The permit allocation rule is the main treatment variable, with permits being fully auctioned or grandfathered. The experimental results show significant investment under both allocation rules in the presence of ex ante uncertainty over the actual investment outcome. However, auctioning permits generally provides stronger incentives to invest in R&D, leading to greater dynamic efficiency compared to grandfathering.
DOI Link: 10.1007/s10640-018-0247-7
Rights: © The Author(s) 2018 This article is distributed under the terms of the Creative Commons Attribution 4.0 International License (, which permits unrestricted use, distribution, and reproduction in any medium, provided you give appropriate credit to the original author(s) and the source, provide a link to the Creative Commons license, and indicate if changes were made.
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