Abstract
In the European Union Emissions Trading System, the supply of carbon permits is determined in a decentralized manner by Member States. Alternatively, the supply could be determined by an EU central authority. We analyze whether decentralization leads to lower total abatement costs under various assumptions about the behavior of Member States and the privacy of information about their abatement costs. If Member States do not behave strategically, then decentralization is preferred, regardless of whether abatement costs are private information. If the Member States behave strategically, then decentralization may or may not be preferred, depending on the degree of uncertainty about abatement cost parameters, the variation in emission endowments, and the number of Member States.
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Open Access This is an open access article distributed under the terms of the Creative Commons Attribution Noncommercial License (https://creativecommons.org/licenses/by-nc/2.0), which permits any noncommercial use, distribution, and reproduction in any medium, provided the original author(s) and source are credited.
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Malueg, D.A., Yates, A.J. Strategic Behavior, Private Information, and Decentralization in the European Union Emissions Trading System. Environ Resource Econ 43, 413–432 (2009). https://doi.org/10.1007/s10640-009-9274-8
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DOI: https://doi.org/10.1007/s10640-009-9274-8