Cap-and-Trade Properties under Different Scheme Designs

Cap-and-Trade Properties under Different Scheme Designs Taschini, Luca; Grüll, Georg This paper examines the key design mechanisms of existing and proposed cap-and-trade markets. First, it is shown that the hybrid systems under investigation (safety-valve with offsets, price floor using a subsidy, price collar, allowance reserve, and options offered by the regulator) can be decomposed into a combination of an ordinary cap-and-trade scheme with European- or American-style call and put options. Th