Optimal monitoring of credit-based emissions trading under asymmetric information
Open access
Date
2011-10Type
- Working Paper
ETH Bibliography
yes
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Abstract
Project-based emissions trading schemes, like the Clean Development Mechanism, are particularly prone to problems of asymmetric information between project parties and the regulator. In this paper, we extend the general framework on incomplete enforcement of policy instruments to reflect the particularities of credit-based mechanisms. The main focus of the analysis is to determine the regulator’s optimal spot-check frequency given plausible assumptions of incomplete enforcement under asymmetric information on reduction costs and heterogeneous verifiability of projects. We find that, depending on the actual abatement cost and penalty schemes, optimal monitoring for credit-based systems is often discontinuous and significantly differs from the one to be applied for cap-andtrade schemes or environmental taxes. We conclude that, in a real-world context, project admission should ultimately be based on the criterion of verifiability. Show more
Permanent link
https://doi.org/10.3929/ethz-a-006660192Publication status
publishedJournal / series
Economics Working Paper SeriesVolume
Publisher
ETH Zurich, Center of Economic Research (CER-ETH)Subject
Environmental regulation; Audits and compliance; Project-based emissions trading systemsOrganisational unit
03635 - Bretschger, Lucas (emeritus) / Bretschger, Lucas (emeritus)
02045 - Dep. Geistes-, Sozial- u. Staatswiss. / Dep. of Humanities, Social and Pol.Sc.
03361 - Schubert, Renate (emeritus) / Schubert, Renate (emeritus)
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Is previous version of: https://doi.org/10.3929/ethz-b-000054281
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ETH Bibliography
yes
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