Handbook on Energy and Climate Change
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Handbook on Energy and Climate Change

Edited by Roger Fouquet

This timely Handbook reviews many key issues in the economics of energy and climate change, raising new questions and offering solutions that might help to minimize the threat of energy-induced climate change.
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Chapter 22: Moral positions on tradable permit markets

Snorre Kverndokk


Permit trading is a preferred environmental policy instrument among economists, and has become a popular tool in environmental treaties in recent decades. The reason is that both in theory (Montgomery, 1972) and in practice (Schmalensee et al., 1998), market-based policy instruments such as permit trading have been shown to foster cost-effectiveness. However, many non-economists have not embraced permit trading as the right way to attack environmental problems, and even among economists there are many arguments for other market-based instruments such as taxation. Environmental organizations, political parties and individuals have expressed concerns about permit trading. Some of these concerns are over specific implementations of permit trading systems or more general practical obstacles to a successful permit trading. Others, however, see permit trading as morally wrong or problematic in principle. For instance, some consider it a way of avoiding one’s obligations, to pay others to clean up, or to reward indulgence; see, for example, Goodin (1994). However, concerns may vary among countries, cultures and religions. While we report results from Norway below, where people express strong concerns about permit trading, most polling shows large support for emissions permit trading in the USA.

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