Emissions Trading with Profit-Neutral Permit Allocations

This paper examines the impact of an emissions trading scheme (ETS) on industry output price costs emissions market shares and proits. We develop formulae for the number of emissions permits that have to be freely allocated to firms in order to neutralize any adverse impact the ETS may have on proits. Under quite general conditions industry proits are preserved so long as firms are freely allocated a fraction of their total demand for permits with this fraction lower than the industry's Herfindahl index. Our results have important implications for ETS design especially for its ability to raise government revenue.

Global Demand Dynamics: Determinants and Policy Issues

This presentation analyses some of the key relationships that are important for understanding global oil demand dynamics. It discusses the income and price determinants of oil demand as well as non-price factors such as the impact of government policies and other factors external to the oil market and which can have a drastic impact on oil demand. It emphasises that the relationship between oil demand and these determinants is far from linear and any analysis of oil markets should take into account non-linear and threshold effects and the cumulative and possibly irreversible nature of some of these effects.

The Oil Market Through the Lens of the Latest Oil Price Cycle

The recent behaviour of prices has polarised views about the key drivers of oil prices. One view attributes the recent behaviour in oil prices to structural transformations in the fundamentals of the oil market. An alternative view considers that oil markets have been distorted by substantial and volatile speculative financial flows. This dichotomy between fundamentals and speculation currently dominates the policy debate about the appropriate measures needed to reduce oil price volatility and to prevent a repeat of the latest price cycle. While it is convenient for some policy makers and analysts that the issues are presented in terms of this dichotomy it is too simplistic to be of use in formulating policy. Instead this presentation offers a more inclusive framework which emphasises the interactions among the various oil price determinants and the various players in the oil market. It also provides an alternative perspective on the oil price formation process based on perceptions of limited feedbacks and e increasing role of expectations and public signals.