Abstract This paper discusses market power effects in ambient permit markets. We consider a dominant firm in a position to exert market power in several markets. A first conclusion is that the distortion observed on manipulated markets spreads to other markets. We find that the manipulated...

Incentive contracts can be proposed to a dominant firm that has been excluded from the pollution permit market. We determine the optimal characteristics of a contract considering the trade-off between market efficiency and the cost of public funds. We show that under incomplete information the...

Permit markets lead polluting firms to purchase abatement goods from an eco-industry, which is often concentrated. This paper studies the consequences of imperfect competition in an eco-industry on the equilibrium choices of the competitive polluting firms. It then characterizes the second best...