Abstract
In this paper a system of `guided permit trading' is developed for SO2emissions reduction which considers permit trading as a bilateral andsequential process. This implies that in order to meet the deposition targetsat the end of the trading process, not every single trade transaction hasto meet the deposition targets. To ensure that the target is ultimately met,the number of permits traded should be controlled by a trade coordinatinginstitution. A simulation of the system of guided bilateral trading ofSO2 permits among European countries on the basis of the SecondSO2 Protocol indicates that some non-profitable trade transactionstake place. This prevents the cost effective emission allocation from beingfully achieved. However, the calculations show that guided bilateral permittrading may generate substantial cost savings while contributing toenvironmental protection.
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Kruitwagen, S., Folmer, H., Hendrix, E. et al. Trading Sulphur Emissions in Europe: `Guided Bilateral Trade'. Environmental and Resource Economics 16, 423–441 (2000). https://doi.org/10.1023/A:1008371731089
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DOI: https://doi.org/10.1023/A:1008371731089