Direct and market effects of enforcing emissions trading programs: An experimental analysis [An article from: Journal of Economic Behavior and Organization]

This digital document is a journal article from Journal of Economic Behavior and Organization, published by Elsevier in 2006. The article is delivered in HTML format and is available in your Amazon.com Media Library immediately after purchase. You can view it with any web browser.

Description:
Since firms in an emissions trading program are linked through the permit market, so too are their compliance choices. Thus, enforcement strategies for trading programs must account for the direct effects of enforcement on compliance and emissions decisions as well as the indirect effects that occur due to changes in permit prices. Our experimental results are consistent with theoretical predictions about both a negative direct effect of enforcement on individual violations and a countervailing market effect through the permit price. Furthermore, there is no direct effect of enforcement on the emissions choices of firms, only a negative price effect.