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Carbon Sequestration And Permit Trading On The Competitive Fringe, Arthur J. Caplan

Applied Economics Faculty Publications

This paper makes two contributions to the carbon-sequestration literature. The first is the development of a theoretical framework in which sequestration and permit trading are analyzed jointly in the context of a competitive fringe model. The second is a numerical analysis demonstrating the role market structure, or market power, might play in the determination of an equilibrium sequestration allocation and carbon price. We present three comparative-static cases, the first two of which assess the impact of relative changes in the cost structures of the dominant firm and competitive fringe. For these two cases we find that the equilibrium allocation of …