Short-Run Implications of Cap-and-Trade versus Baseline-and-Credit Emission Trading Plans: Experimental Evidence

Two approaches to emissions trading are cap-and-trade, in which an aggregate cap on emissions is distributed in the form of allowance permits, and baseline-and-credit, in which firms earn emission reduction credits for emissions below their baselines. Theoretical considerations suggest the long-run equilibria of the two plans will differ if baselines are proportional to output, because a variable baseline is equivalent to an output subsidy. This is in opposition to the prediction that when output capacity is fixed, the short-run equilibria of the two plans will be identical. As a first step towards testing the long-run model, this paper reports on a laboratory experiment designed to test the shortrun prediction. A computerized environment has been created in which subjects representing firms choose emission technologies under fixed output capacity and participate in markets for emission rights and for output. Demand for output is simulated. All decisions are tracked through a double-entry bookkeeping system. Our evidence supports the theoretical prediction that the two trading mechanisms yield similar outcomes, however both exhibit significant deviation from the predicted equilibrium.

Implications of Alternative Emission Trading Plans: Experimental Evidence

Two approaches to emissions trading are cap-and-trade, in which an aggregate cap on emissions is distributed in the form of emission allowances and baseline-and-credit, in which firms earn emission reduction credits for emissions below their baselines. Theoretical considerations suggest the long-run equilibria of the two plans will differ if baselines are proportional to output, because a variable baseline is equivalent to an output subsidy. To test this prediction we have developed a computerized environment in which subjects representing firms can adjust both their emission rates (per unit output) and capacity levels. Subjects buy or sell emission rights (allowances or credits) in a sealed bid call auction. The demand for output is simulated. All decisions are tracked through a double-entry bookkeeping system. This environment is to be used to compare short and long run responses to the alternative trading methods. Initial experiments in this environment will alternately hold emission rate and capacity choice constant. We report on six experimental sessions with variable emissions rates but fixed capacity and two pilot sessions with variable capacity but fixed emission rates.

Long-Run Implications of Alternative Emission Trading Plans: An Experiment with Robot Traders

Two approaches to emissions trading are cap-and-trade, in which an aggregate cap on emissions is distributed in the form of permits, and baseline-and-credit, in which firms earn credits for emissions below their baselines. Theoretical considerations suggest the long-run equilibria of the two plans will differ if baselines are proportional to output, because a variable baseline is equivalent to an output subsidy. This paper reports on a laboratory environment designed to test this prediction. A computerized environment has been created in which subjects representing firms choose capacity and emission rates and participate in markets for permits or credits and for output. Demand for output is simulated. All decisions are tracked through a double-entry bookkeeping system. The timing of decisions was adjusted to avoid short-run instability. The paper reports the parameterization for an experiment with human traders and results of a simulated experiment using robots.

Baseline-and-Credit Emission Permit Trading: Experimental Evidence Under Variable Output Capacity

Two approaches to emissions trading are cap-and-trade, in which an aggregate cap on emissions is distributed in the form of allowance permits, and baseline-and-credit, in which firms earn emission reduction credits for emissions below their baselines. Theoretical considerations suggest the long-run equilibria of the two plans will differ if baselines are proportional to output, because a variable baseline is equivalent to an output subsidy. As a progressive step towards testing the full long-run model, this paper reports on a laboratory experiment designed to test the prediction under fixed emission rates and variable output capacity. A computerized environment has been created in which sub jects representing firms choose output capacities under fixed emission technology and participate in markets for emission rights and for output. Demand for output is simulated. All decisions are tracked through a double-entry bookkeeping system. Our evidence supports the theoretical prediction that aggregate output and emissions are inefficiently high under a baseline-and-credit trading plan compared to a corresponding cap-and-trade plan.

Baseline-and-Credit Style Emission Trading Mechanisms: An Experimental Investigation of Economic Inefficiency

Two approaches to emissions trading are cap-and-trade, in which an aggregate cap on emissions is distributed in the form of allowance permits, and baseline-and-credit, in which firms earn emission reduction credits for emissions below their baselines. Theoretical considerations suggest the long-run equilibria of the two plans will differ if baselines are proportional to output, because a variable baseline is equivalent to an output subsidy. This paper reports on a laboratory experiment designed to test the prediction in a laboratory environ- ment in which sub jects representing firms choose emission technologies and output capacities. A computerized environment has been created in which sub jects participate in markets for emission rights and for output. Demand for output is simulated. All decisions are tracked through a double-entry bookkeeping system. Our evidence supports the theoretical prediction that aggregate output and emissions are in- efficiently high under a baseline-and-credit trading plan compared to a corresponding cap-and-trade plan.

Socioeconomic Influence on the Health of Older People: Estimates Based on Two Longitudinal Surveys

There is a strong positive relationship between socioeconomic status (SES) and health, but identifying the direction of causation is difficult. This study exploits the longitudinal nature of two Canadian surveys, the Survey of Labour and Income Dynamics and the National Population Health Survey, to study the link from SES to health. For people aged 50 and older who are initially in good health we examine whether changes in health status over the next two to four years are related to prior SES, as represented by income and education. Although the two surveys were designed for quite different purposes the evidence they yield with respect to the probability of remaining in good health is strikingly similar. Both suggest that SES does play a role, that the differences across SES groups are quantitatively significant, that the differences increase with age, and that they are much same for men and women.health; socioeconomic status; SLID; NPHS

Socioeconomic Influence on the Health of Older People: Estimates Based on Two Longitudinal Surveys

There is a strong positive relationship between socioeconomic status (SES) and health, but identifying the direction of causation is difficult. This study exploits the longitudinal nature of two Canadian surveys, the Survey of Labour and Income Dynamics and the National Population Health Survey, to study the link from SES to health. For people aged 50 and older who are initially in good health we examine whether changes in health status over the next two to four years are related to prior SES, as represented by income and education. Although the two surveys were designed for quite different purposes the evidence they yield with respect to the probability of remaining in good health is strikingly similar. Both suggest that SES does play a role, that the differences across SES groups are quantitatively significant, that the differences increase with age, and that they are much same for men and women.health; socioeconomic status; SLID; NPHS

Socioeconomic Influences on the Health of Older Canadians: Estimates Based on Two Longitudinal Surveys

It is well established that there is a positive statistical relationship between socioeconomic status (SES) and health but identifying the direction of causation is difficult. This study exploits the longitudinal nature of two Canadian surveys, the Survey of Labour and Income Dynamics and the National Population Health Survey, to study the link from SES to health (as distinguished from the health-to-SES link). For people aged 50 and older who are initially in good health we examine whether changes in health status over the next two to four years are related to prior SES, as represented by income and education. Although the two surveys were designed for different purposes and had different questions for income and health, the evidence they yield with respect to the probability of remaining in good health is similar. Both suggest that SES does play a role and that the differences across SES groups are quantitatively significant, increase with age, and are much the same for men and women.health transitions, income, education

The Transition from Good to Poor Health: An Econometric Study of the Older Population

This is a study of the influence of socioeconomic factors on the state of health of older Canadians. Three years of panel data from the Survey of Labour and Income Dynamics are used to model the transition probabilities between good and poor health. Care is taken to avoid the problem of endogeneity of income in modelling its effects, and to adjust reported income to free it from its strong association with age at the time of the survey. Of particular note are the significant effects found for income, in spite of universal public health care coverage. Significant effects are found also for age, education, and other variables.Socio-economic factors and health; older population; panel data; SLID

The Transition from Good to Poor Health: An Econometric Study of the Older Population

This is a study of the influence of socioeconomic factors on the state of health of older Canadians. Three years of panel data from the Survey of Labour and Income Dynamics are used to model the transition probabilities between good and poor health. Care is taken to avoid the problem of endogeneity of income in modelling its effects, and to adjust reported income to free it from its strong association with age at the time of the survey. Of particular note are the significant effects found for income, in spite of universal public health care coverage. Significant effects are found also for age, education, and other variables.Socioeconomic factors and health; older population; panel data