The effects of rent seeking over tradable pollution permits

Arbeitspapier

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 specific groups. In most circumstances, these decisions are often politically contentious and frequently influenced by rent seeking behaviour. In this paper, we use a contest model to analyse the effects of rent seeking effort when permits are freely distributed (grandfathered). Rent seeking behaviour can influence 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 influence both the distribution of rents and the ex post value of these rents, whilst welfare usually decreases in the responsiveness of the regulator.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Economics Working Paper Series ; No. 09/112

Classification and Topics

• Classification: Wirtschaft ; Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior ; Positive Analysis of Policy Formulation and Implementation ; Air Pollution; Water Pollution; Noise; Hazardous Waste; Solid Waste; Recycling
• Subject: tradable permit market ; rent seeking ; initial allocation ; Emissionshandel ; Rent-Seeking ; Emissionshandel ; Operations Research

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Hanley, Nick ; MacKenzie, Ian A.
• Event: Veröffentlichung
• (who): ETH Zurich, CER-ETH - Center of Economic Research
• (where): Zurich
• (when): 2009

Further information

• DOI: doi:10.3929/ethz-a-005859360
• Handle: http://hdl.handle.net/10419/171555
• Last update: 10.03.2025, 11:43 AM CET