In the European Union Emissions Trading Scheme, the supply of carbon permits is determined in a decentralized manner by the Member States. Alternatively, the supply could be determined by the EU central authority. We analyze whether decentralization leads to lower total abatement costs under...

We extend the analysis of optimal scale in pollution permit markets by allowing for both market power and private information. We characterize the total costs (abatement costs and damages) under market power and private information and compare them to total costs under competition. It is...

We analyze the effects of strategic behavior and private information in pollution permit markets in which all firms have market power. The market is characterized by supply-function equilibria. Firms submit net supplies for permits and a market maker selects the market-clearing price. Net...