Designing efficient markets for carbon offsets with distributional constraints. Bento, A. M., Kanbur, R., & Leard, B. Journal of Environmental Economics and Management, 70:51--71, March, 2015.
Designing efficient markets for carbon offsets with distributional constraints [link]Paper  doi  abstract   bibtex   
This paper presents an assessment of the relative efficacy of three key instruments – baselines, trade ratios and limits - which are under policy discussion in the design of carbon offset programs. We rank the instruments by their implications for total emissions, economic efficiency, and efficiency gain relative to a distributional transfer from capped to uncapped sectors. We find that the baseline is the best instrument for maximizing welfare as it directly reduces the share of offsets that are non-additional and that second-best policies do not sacrifice much welfare relative to the standard first-best policy prescription.
@article{bento_designing_2015,
	title = {Designing efficient markets for carbon offsets with distributional constraints},
	volume = {70},
	issn = {0095-0696},
	url = {http://www.sciencedirect.com/science/article/pii/S0095069614000862},
	doi = {10.1016/j.jeem.2014.10.003},
	abstract = {This paper presents an assessment of the relative efficacy of three key instruments – baselines, trade ratios and limits - which are under policy discussion in the design of carbon offset programs. We rank the instruments by their implications for total emissions, economic efficiency, and efficiency gain relative to a distributional transfer from capped to uncapped sectors. We find that the baseline is the best instrument for maximizing welfare as it directly reduces the share of offsets that are non-additional and that second-best policies do not sacrifice much welfare relative to the standard first-best policy prescription.},
	urldate = {2015-02-27},
	journal = {Journal of Environmental Economics and Management},
	author = {Bento, Antonio M. and Kanbur, Ravi and Leard, Benjamin},
	month = mar,
	year = {2015},
	keywords = {Additionality, Cap and trade, Carbon offsets, Distributional concerns},
	pages = {51--71},
	file = {ScienceDirect Snapshot:files/50891/S0095069614000862.html:text/html;ScienceDirect Snapshot:files/50893/S0095069614000862.html:text/html}
}

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