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Preventing Market Disruptions in Cap-and-Trade Programs

October 2008 | William Whitesell, Stacey Davis

This paper discusses trading system design elements that could help prevent market disruptions, including aspects of allowance auctions, transaction registries, allowance banking, and price stabilizing mechanisms. It raises the possibility of employing temporary, special methods in the early years of program implementation to create an added degree of safety as firms and regulators gain experience with the new market. The paper focuses on the regulatory functions involved; it does not evaluate the wide range of possible institutions that could perform those roles.

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