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...

Should citizens lobby the government to reduce pollution permit endowments or should they participate directly in the market by purchasing and retiring permits? We address this question in a two-stage model. In the first stage firms and citizens exert effort to influence the endowment of...

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...