Tradable Emission Permits in a Federal System

26 Pages Posted: 21 Jul 2005

See all articles by Harrie A. A. Verbon

Harrie A. A. Verbon

Tilburg University - CentER; CESifo (Center for Economic Studies and Ifo Institute)

Cees Withagen

Free University of Amsterdam; Tilburg University

Date Written: June 2005


A system of tradable permits in the standard setting is effective in attaining the policy objective with regard to pollution reduction at the least cost. This outcome is challenged in case of a tradable permit system in a federal state with individual states having discretionary power regarding environmental policy and where pollution is transboundary across states. This paper explores the opportunities of the central authority to influence the effectiveness of the system, under different institutional arrangements, through the initial allocation of permits

Keywords: tradable permits, trade bans, fiscal federalism

JEL Classification: H21, H23, Q00

Suggested Citation

Verbon, Harrie A. A. and Withagen, Cees A. M., Tradable Emission Permits in a Federal System (June 2005). CESifo Working Paper Series No. 1482, Available at SSRN:

Harrie A. A. Verbon (Contact Author)

Tilburg University - CentER ( email )

Department of Economics
P.O. Box 90153
5000 LE Tilburg
+31 13 466 28 78 (Phone)
+31 13 466 30 42 (Fax)

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679

Cees A. M. Withagen

Free University of Amsterdam ( email )

Tinbergen Institute De Boelelaan 1105
1081 HV Amsterdam

Tilburg University ( email )

Postbus 90153
Tilburg, DC Noord-Brabant 5000 LE

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