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Restiani, Phillia; Betz, Regina. |
This paper employs a theoretical model to examine compliance incentives and market efficiency under three penalty types: the fixed penalty rate, which uses a constant marginal financial penalty; the make-good provision (quantity penalty), where each missing permit in the current period is to be offset with a ratio (restoration rate) in the following period; and a mixed penalty, which combines the two penalty types. Using a simple two-period model of firm's profit maximisation, we analyse compliance decisions and the efficient penalty level under each penalty type. Firms‟ compliance strategies are modelled as an irreversible investment in abatement measures and permit buying in the market. Our findings indicate that the penalty type does not affect... |
Tipo: Report |
Palavras-chave: Emissions trading; Penalty design; Compliance; Environmental Economics and Policy; Resource /Energy Economics and Policy. |
Ano: 2010 |
URL: http://purl.umn.edu/107585 |
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