Volume : V, Issue : II, February - 2015

Market Price Minimization of Tradable Pollution Permits to Reduce Pollution

R Ganesh Kumar, Dr Hansa Lysander Manohar

Abstract :

Market price of tradable pollution permits needs to be minimized to increase the transparency of the price information. This contributes to the increase in the volume of trade in the market by reducing the transaction cost in trading. The trading programme thus becomes more effective in reducing pollution by increase in the volume of trade. Scarce and unpriced resources are efficiently allocated using permit trading technique. Tradable Pollution Permits followed the “Command–and–Control” Approach which was initially used to control pollution. The tradable pollution permits on the other hand, are an instrument which can be used to reduce pollution and at the same time can be traded in the market to gain revenue (Tietenberg, 1985). Tradable Pollution Permits is essentially nothing but “Market mechanism”. An efficient distribution of the right to pollute takes place. It was used in US in the Acid rain Programme, Lead Reduction Programme in Gasoline and RECLAIM. The Kyoto Protocol was adopted in 1997 and it came into existence in 2005. Measurement of transaction cost and its impact on the market price in tradable pollution permits is discussed using optimization techniques. The first case is that of a single company social planner and the next case is that of two firms when the information available is asymmetric.

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Article: Download PDF   DOI : 10.36106/ijar  

Cite This Article:

R Ganesh Kumar, Dr Hansa Lysander Manohar Market Price Minimization of Tradable Pollution Permits to Reduce Pollution Indian Journal of Applied Research, Vol.5, Issue : 2 February 2015

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