Journal
ENERGY POLICY
Volume 39, Issue 3, Pages 1746-1753Publisher
ELSEVIER SCI LTD
DOI: 10.1016/j.enpol.2011.01.004
Keywords
Price floor; Hybrid emissions pricing; Emissions trading
Funding
- Australian Research Council
- Australian Government Department of the Environment, Water, Heritage and the Arts through the Environmental Economics Research Hub
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Price floors in greenhouse gas emissions trading schemes can guarantee minimum abatement efforts if prices are lower than expected, and they can help manage cost uncertainty, possibly as complements to price ceilings. Provisions for price floors are found in several recent legislative proposals for emissions trading. Implementation however has potential pitfalls. Possible mechanisms are government commitments to buy back permits, a reserve price at auction, or an extra fee or tax on acquittal of emissions permits. Our analysis of these alternatives shows that the fee approach has budgetary advantages and is more compatible with international permit trading than the alternatives. It can also be used to implement more general hybrid approaches to emissions pricing. (C) 2011 Elsevier Ltd. All rights reserved.
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