Emissions Trading: Principles and Practice

First published in 1985, Emissions Trading was a comprehensive review of the first large-scale attempt to use economic incentives in environmental policy in the U.S. and of the empirical and theoretical research on which this approach is based. Since its publication it has consistently been one of the most widely cited works in the tradable permits literature. The second edition of this classic study of pollution reform considers how the use of transferable permits to control pollution has evolved, looks at how these programs have been implemented in the U.S. and internationally, and offers an objective evaluation of the resulting successes, failures, and lessons learned over the last twenty-five years.

Table of Contents:

Figures and Tables
Preface
Abbreviations
Introduction
Describing the Evolution
The Evolution of Emissions Trading
The Evolution of Design Features
An Overview of the Book
The Conceptual Framework
The Regulatory Dilemma
The Cost-Effectiveness Framework
Cost-Effective Permit Markets
The Role of Transactions Costs
The Role of Administrative Costs
The Role of Technical Change
Summary
The Consequences of Emissions Trading
The Nature of the Evidence
Ex Ante Evaluations: The Evidence
Ex Post Evaluations: The Evidence
Summary
The Spatial Dimension
Difficulties in Implementing an Ambient Permit System
Possible Alternatives
Summary
The Temporal Dimension
Borrowing, Banking, and the Nature of the Environmental Target
Linking Emissions and Pollutant Concentrations
The Role of Banking and Borrowing
Strategies for Controlling Seasonal or Episodic Peaks
Summary
The Initial Allocation
Initial Allocation Approaches
Comparing the Allocation Approaches
Cost-Effectiveness Implications of the Initial Allocation
Summary
Market Power
Permit Price Manipulation: Conceptual Models
Leveraging Power Between Output and Permit Markets
Ex Ante Simulations
Results from Experimental Studies
Mechanisms for Controlling Market Power
Programmatic Design Features That Affect Market Power
Summary
Monitoring and Enforcement
The Nature of the Domestic Enforcement Process
The Nature of the International Enforcement Process
The Economics of Enforcement
Current Enforcement Practice
Summary
Lessons
Lessons About Program Effectiveness
Lessons About Instrument Choice and Program Design
Concluding Comments
References
Index

'At its best in explaining both the complexities of emission trading program design and the intricacies of the economic theory underlying the tradable discharge permit system and its variations.'
Journal of Policy Analysis and Management