Monday 12
A3 - Environment I
Chair: Matthieu Glachant
› 10:40 - 11:05 (25min)
› Room 522 - S. Bernhardt
Differentiating permits allocation across areas
Jean-Philippe Nicolai  1@  , Jorge Zamorano  2@  
1 : ETH Zurich  -  Website
Zurich -  Switzerland
2 : Université Paris I Panthéon Sorbonne, Centre d'Economie de la Sorbonne,  (Paris I, CES)
Université Paris I - Panthéon-Sorbonne
106-112 boulevard de l'Hôpital, 75647 Paris Cedex 13 -  France

This paper addresses the issue to differentiate permits allocation across areas, which is linked to the risk of relocation. Two different areas are considered, a domestic one in which the emissions are regulated and a second one in which no environmental regulation is applied. The domestic area is subdivided into the coastal area, located near to the border and the inland area, far away from the border. The paper shows that the risk of relocation is different across the two areas. Free allowances may be used to reduce these risks and a possibility to minimize the cost of preventing firms to relocate could be to differentiate permits across areas. However, differentiating subsidies in a same sector is a politically sensitive initiative so that the competition authorities may be reluctant to implement such policy. Nevertheless, the paper shows that the inland firms would also benefit from the subsidies given to the coastal firms. 

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