Study On Trading Rules Of Tradable Permits System

The author firstly analyses three main environmental management polices: discharge standard, effluent tax and tradable permits, and points out that tradable permits have some advantages over other two polices according to the situation of China and the state's pollution control policy which will control the total quantity of the main kinds of pollutants. The tradable permits policy will be cost-effective to achieve the environmental goal.The innovation of pollutant abatement technology is an important criterion to assess the environmental policy. The previous researches have concluded that auctioning the permits excel free rationing (including Grandfathering and Out-put Based Allocation) in the incentives to innovate the pollutant abatement technology based on the assumption of perfect market without transaction costs. But it was proved by many researchers that transaction costs always be the crucial factor influencing the trading program efficiency. The thesis initially analyses the permits allocation's impact on the incentives to innovation based on the transaction costs, and fined that it can not concluded that one of the three allocation methods always have better incentives than the two others do, but the incentives to innovation depends on firms number, imitation coefficient, the quantity of free permits and abatement cost function. But in particular situation when the innovation firm has excessive permits to sell and the imitation firms have to buy permits from the market, auctioning the permits has better incentives than the other two do. So this analysis suggests that the regulator must investigate the program's situation case by case before deciding to choose which allocation method, and combining these allocation methods perhaps not only have better incentives to innovate but also can smooth the program execution process.The next essay concentrates on the discussing the properties of the intertemporal trading program. The Rubin's (1996) model has been extended to the firms' private behaviors and social planner's behaviors in this essay. It is concluded that the firms' private behaviors and social planner's behaviors are affected by the firms' discount rate, expected productive cost, expected production price and environment damage function. The thesis points out that there is a discrepancy between the results of the market equilibrium and social planner's optimization in most situations, and the factors causing the discrepancy are the factors mentioned above. However, there is a mechanism to correct the discount rate by discounting the banking and borrowing permits. The permits banking program can not always get the optimum emission path according to the social planner, but it has great advantage over the not-allow banking program in efficiency.In the last essay, the author analyses properties of the non-uniformly mixed pollutant discharge permits program, and points out that this kind of pollutant discharge program encounters many difficulties such as high transaction costs, thin market and monopoly problem. Although many previous papers suggest some trading-ratio mechanisms to guarantee the environmental goal, they encounter the same difficulties as well as the program without trading ratio. But the tradable permits with exogenous trading ratio mechanism can be used to control the river's effluent pollution if the transaction process is enough simple. This essay creatively carries out a mechanism with exogenous trading ratios equal to the transfer coefficients, and proves that the market equilibrium is cost-efficiency as same as the ambient permits system. The trading ratio system can also get the cost-effective convergence results when a two-stage MADIC system has been designed, even if the transaction is sequential and bilateral.