Lisa Anouliès participera jeudi 19 mars 2015 au «Lunch séminaire : Economie de l’Environnement » à PSE-Ecole d’Economie de Paris. Elle y présentera son papier intitulé “Heterogeneous firms in a cap-and-trade program”.
The paper develops a model of heterogeneous firms in monopolistic competition whose activity generates pollution regulated by a cap-and-trade program. The model first finds that in general equilibrium the level of the cap on emissions has no effect on firms’ profits and decision to remain on the market. On the contrary, the initial allocation of allowances impacts firms’ entry and exit decisions and aggregate economic variables. Increasing the share of free allocation intensifies their strategic behavior toward the environmental policy, which results in a reallocation of resources toward the most productive firms and in a decrease in the mass of active firms. The paper finally shows that this strategic behavior increases the economic cost of achieving an environmental objective.