Information Aggregation in Emissions Markets with Abatement
| Autor: | Estelle Cantillon, Aurélie Slechten |
|---|---|
| Jazyk: | angličtina |
| Rok vydání: | 2018 |
| Předmět: |
efficient market hypothesis
emissions trading Search Learning Information and Knowledge Communication Belief Economie de l'environnement et des ressources naturelles G14 Economie financière Expectations Speculations Theory [Network Formation and Analysis] Q58 D83 D84 information aggregation Government Policy [Environmental Economics] price information Information and Market Efficiency Event Studies D85 |
| Zdroj: | ECARES Working Papers; 2018-37 Lancaster University-Pure |
| Popis: | A key policy argument in favor of emissions markets (relative to command-and-control types of regulation) is their ability to aggregate dispersed information and generate price signals to guide firms' trading and abatement decisions. We investigate this argument in a multi-period model where firms receive noisy private signals about their current period emissions and privately observe their previous period emissions before this information is made public to the rest of the market. Firms respond to information by trading and abating emissions. We show that there exists a rational expectations equilibrium that fully aggregates firms' private information, justifying the policy argument in favor of emissions markets, in the absence of other frictions. We also derive predictions about how prices should be reacting to new private or public information and show that the possibility of abatement dampens the impact of shocks on prices. Finally, we show that the information aggregation result breaks down if firms' abatement costs are also private information. info:eu-repo/semantics/published |
| Databáze: | OpenAIRE |
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