This paper contributes to the literature in market power for emissions permits, modeling an emissions trading scheme in which polluters differ only in their business-as-usual emissions. They play a two-stage static complete information game in which their market power arises endogenously from...

I propose an emissions trading scheme which mimics the upcoming third phase design of the European Union Emissions Trading Scheme, with auction as initial allocation method. Risk-averse polluters and speculators, participating in the scheme, respond idiosyncratically to an economy-wide shock. I...