One of the most important problems with the first cap and trade systems established to control greenhouse gases such as the Regional Greenhouse Gas initiative and the European Union Carbon Emissions Market has been: The initial allocation of allowances was too low so that permit prices were too high and emitters would not pay for permits. The initial allocation of allowances led to an initial market equilibrium but subsequent increases in the number of allowances led to market collapse. Many emitters did not believe that the cap and trade system would be continued into the future so they did not participate in the market. The initial total allocation of emission allowances had to be reduced because permit prices indicated the allowance cap was not a constraint on emissions. The two programs served as the basis to the Greenhouse Gas Market established under the Paris Climate Accord.

One of the most important problems with the first cap and trade systems established to control greenhouse gases such as the Regional Greenhouse Gas initiative and the European Union Carbon Emissions Market has been: The initial allocation of allowances was too low so that permit prices were too high and emitters would not pay for permits. The initial allocation of allowances led to an initial market equilibrium but subsequent increases in the number of allowances led to market collapse. Many emitters did not believe that the cap and trade system would be continued into the future so they did not participate in the market. The initial total allocation of emission allowances had to be reduced because permit prices indicated the allowance cap was not a constraint on emissions. The two programs served as the basis to the Greenhouse Gas Market established under the Paris Climate Accord.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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