Typology of Pollution Regimes：污染的政权类型.pptVIP

Why Would Polluting Firms Want to Bank Credits (co.) Saving Purchase/Sale Transactions Costs – if polluting firms don’t know if they will need an excess credit for future use, banking may mean that they will avoid some purchase/sale-related transactions costs. Example – Assume 50/50 if excess allowance in future (at time t2) will be needed by the firm to cover its t2 emissions. If firm sells allowance now (at time t1), 50% chance the firm will have to buy an allowance at t2, 50% chance that the firm won’t have to. If any sale or purchase transaction means $100 in transactions costs, expected transaction costs of selling at t1 plan is $100 + (.5 X $100) or $150. If firm banks credit at t1, expected transactions costs are (.5 X $100) or $50. The greater the purchase/sale transactions costs per purchase/sale, the more compelling is this transactions costs explanation of banking. Why Would Polluting Firms Want to Bank Credits (co.) Tax-related advantages of banking excess allowances. If the firm sells at t1 and then needs to buy an allowance at t2, it will post a gain at t1 and a loss/expense at t2. If it turns out the firm doesn’t need another allowance at t2, the firm will just post a gain at t1. By contrast if the firm banks at t1 and then sells at t2, it will post a gain at t2. If the firm banks and then uses the credit at t2, the firm will have no tax gain or losses to post. From a tax minimization/avoidance perspective, the tax possibilities associated with the banking plan (50% prospect of a late/t2 gain, and 50% prospect of no gain or loss) are preferable to those associated with the no banking/sell in time t1 plan (50% prospect of an early/t1 gain, and 50% prospect of an early/t1 gain combined with a late/t2 loss) Why Would Polluting Firms Want to Bank Credits (co.) Banking allowances also may reflect an anti-competitive strategy If established firms “hoard” allowances, it will be difficult for new entrants to buy bulk of allowances necessary to