Strategic banking under imperfect competition: Dynamic analysis of emissions permit and power banking

2017 Fiscal Year Final Research Report

• Project/Area Number: 26380291
• Research Category: Grant-in-Aid for Scientific Research (C)
• Allocation Type: Multi-year Fund
• Section: 一般
• Research Field: Economic policy
• Research Institution: National Graduate Institute for Policy Studies
• Principal Investigator: TANAKA Makoto 政策研究大学院大学, 政策研究科, 教授 (10377137)
• Project Period (FY): 2014-04-01 – 2018-03-31
• Keywords: 環境政策 / エネルギー政策 / 排出権バンキング / スマートグリッド / 不完全競争 / 動学

Outline of Final Research Achievements

This study develops an economic model of strategic inter-temporal permit banking under imperfect competition. We further extend the model to simulate real markets such as the California power and permit markets. We show that the dominant firm exerts market power under imperfect competition and imperfect inter-temporal arbitrage. Consequently, the permit price rises at a higher rate than the discount rate. This is in contrary to the perfectly competitive permit market, where the permit price rises at the discount rate following the classic Hotelling's rule.

Free Research Field

エネルギー、環境、産業組織