Publication Detail

Marketable Emission Permit Trading and Banking for Light-Duty Vehicle Manufacturers and Fuel Suppliers


Research Report

Suggested Citation:
Rubin, Jonathan D. (1993) Marketable Emission Permit Trading and Banking for Light-Duty Vehicle Manufacturers and Fuel Suppliers. Institute of Transportation Studies, University of California, Davis, Research Report UCD-ITS-RR-93-20

This dissertation extends the theoretical and empirical research on the intertemporal trading of marketable emission permits. It first develops a theoretical model designed to look at the general problem of intertemporal permit trading, and then applies the lessons from this model in two empirical applications. The theoretical model presents the behavior of firms facing emission standards when emission permits may be purchased, sold, banked, and borrowed. The empirical applications are the first to look at the intertemporal impacts of emission banking, averaging, and trading. In the first empirical application, light-duty vehicle manufacturers face a fleetwide average emission standard for new model year vehicles. For the data set used, it is estimated that the cost savings from banking are modest, but that the impact on the emission stream can be significant. If marginal damages from pollution are increasing, banking generates lower total damages from pollution. The second application examines possible emission regulations on gasoline suppliers to encourage the use of alternative transportation fuels such as compressed natural gas, methanol and electricity. The empirical model examines the cost and emission implications of meeting emission goals for fuels with a multi-period, dynamic model which includes emission banking and the coordination of the on-road vehicle stock. Given different cost and emission constraint scenarios, the least-cost mix of alternative and conventional fuels and vehicles is derived.
Ph.D. Dissertation.