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On the Endogeneity of Market Power in Emissions Markets

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Abstract

Previous approaches on market power in emissions trading markets rely on the existence of a subset of competitive players. In this paper, I relax this assumption and treat market power as an endogenous concept which depends on the initial allocation of allowances. All parties realize their potential influence on the market price. This approach allows a clear comparative statics analysis of the impact of the allowance allocation on the efficiency of markets. I provide specific examples that illustrate the implications that stem from the proposed modeling approach relative to previous models.

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  1. University of Hamburg, Von Melle Park 5, 20146, Hamburg, Germany

    Andreas Lange

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  1. Andreas Lange
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Correspondence to Andreas Lange.

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Lange, A. On the Endogeneity of Market Power in Emissions Markets. Environ Resource Econ 52, 573–583 (2012). https://doi.org/10.1007/s10640-012-9543-9

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  • DOI: https://doi.org/10.1007/s10640-012-9543-9

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