Template-Type: ReDIF-Paper 1.0 Author-Name: John K. Stranlund Author-Name-First: John Author-Name-Last: Stranlund Author-Email: stranlund@resecon.umass.edu Author-Workplace-Name: Department of Resource Economics, University of Massachusetts Amherst Author-Name: James J. Murphy Author-Name-First: James Author-Name-Last: Murphy Author-Email: murphy@uaa.alaska.edu Author-Workplace-Name: Department of Economics, University of Alaska Anchorage Author-Workplace-Name: Institue of State Economy, Nankai University Author-Name: John M. Spraggon Author-Name-First: John Author-Name-Last: Spraggon Author-Email: spraggon@resecon.umass.edu Author-Workplace-Name: Department of Resource Economics, University of Massachusetts Amherst Title: Price Controls and Banking in Emissions Trading: An Experimental Evaluation Abstract: We present results from laboratory emissions markets designed to investigate the effects of price controls and permit banking on limiting permit price risk. While both instruments reduce between-period price volatility and within-period price dispersion, combining price controls and permit banking yields important benefits. Banking alone produces high permit prices in earlier periods that fall over time, but the combined policy produces lower initial prices and lower volatility. However, banking, price controls, and the combination all produce higher between-period emissions volatility. Hence, for emissions markets that seek to control flow pollutants with strictly convex damages, efforts to limit permit price risk can result in higher expected damage. Creation-date: 2014-04 File-URL: http://www.econpapers.uaa.alaska.edu/RePEC/ala/wpaper/ALA201401.pdf File-Format: Application/pdf Classification-JEL: C91, L51, Q58, C90, H23, D62 Keywords: experimental economics, Emissions trading, Cap and trade, Laboratory experiments, Permit markets, Permit banking, Price controls, Price collars, environmental economics Publication-Status: Published in Journal of Environmental Economics and Management, July 2014, pages 71-86 Number: 2014-01 Handle: RePEc:ala:wpaper:2014-01