PT  - JOURNAL ARTICLE
AU  - Dewees, Donald N.
TI  - Emissions Trading: ERCs or Allowances?
AID  - 10.2307/3146937
DP  - 2001 Nov 01
TA  - Land Economics
PG  - 513--526
VI  - 77
IP  - 4
4099  - http://le.uwpress.org/content/77/4/513.short
4100  - http://le.uwpress.org/content/77/4/513.full
SO  - Land Econ2001 Nov 01; 77
AB  - Emissions trading takes place from two alternative baselines: 1) emission reduction credits (ERCs) in which the baseline is existing regulations which are often activity-based; or 2) cap-and-trade which specifies the total allowable emissions. This paper examines the effects of these two tradable permit systems on marginal and average costs for the firm, using electricity generation as an example. The ERC system subsidizes the activity level to which it is tied and fails to incorporate the full cost of external harm into the product price. If the permit limit is chosen efficiently, the cap-and-trade system is more efficient. (JEL Q25, Q28)