This paper is a rst step in analysing how a market for tradeable permits created by an environmental agreement aects the stability of the agreement. I present a model in which the stability implications of (a) the market struc- ture of the permit market and (b) the principle of initial allocation of permits can be analysed. I show that with identical players and an allocation giving every player an equal amount of permits, the market structure has no eect on the stability of the agreement, while for a given market structure this allocation makes the agreement more stable than any other allocation.
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