MacKenzie, Ian A.
- Working Paper
The establishment of a tradable permit market requires the regulator to select a level of aggregate emissions and then distribute the associated permits (rent) to speci c groups. In most circumstances, these decisions are often politically contentious and frequently in uenced by rent seeking behaviour. In this paper, we use a contest model to analyse the e¤ects of rent seeking effort when permits are freely distributed (grandfathered). Rent seeking behaviour can in uence both the share of permits which an individual firm receives and also the total supply of permits. This latter impact depends on the responsiveness of the regulator to aggregate rent seeking effort. Using a three-stage game, we show that rent seeking can in uence both the distribution of rents and the ex post value of these rents, whilst welfare usually decreases in the responsiveness of the regulator Show more
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Journal / seriesWorking paper series
PublisherInstitut für Wirtschaftsforschung
Subjecttradable permit market; rent seeking; initial allocation
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