{"title":"The CO2 cost pass-through and market power in emission trading schemes with vertical relations","authors":"Wenya Liu, Xusen Zhu, Zhe Chen","doi":"10.1002/mde.4356","DOIUrl":null,"url":null,"abstract":"<p>Recently, the use of pass-through as an economic tool has garnered increasing interest. This paper explores the relationship between CO2 cost pass-through and market power within emission trading schemes characterized by vertical relations. Our study finds that increased competition in the wholesale market can mitigate pass-through under mild conditions, while countervailing buyer power at the retail level can partially neutralize the effects of CO2 cost pass-through. Furthermore, our numerical tests reveal pass-through overshifting, occurring even under non-convex market demand conditions. Our results generalize and update some known findings in literature (e.g. Wang and Zhou, 2017; Yu et al., 2021; and Chen et al., 2023) and carry some important implications for energy policy, environmental regulation, and welfare analysis.</p>","PeriodicalId":18186,"journal":{"name":"Managerial and Decision Economics","volume":"46 1","pages":"88-99"},"PeriodicalIF":2.5000,"publicationDate":"2024-08-22","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":"0","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"Managerial and Decision Economics","FirstCategoryId":"96","ListUrlMain":"https://onlinelibrary.wiley.com/doi/10.1002/mde.4356","RegionNum":3,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"Q2","JCRName":"ECONOMICS","Score":null,"Total":0}
引用次数: 0
Abstract
Recently, the use of pass-through as an economic tool has garnered increasing interest. This paper explores the relationship between CO2 cost pass-through and market power within emission trading schemes characterized by vertical relations. Our study finds that increased competition in the wholesale market can mitigate pass-through under mild conditions, while countervailing buyer power at the retail level can partially neutralize the effects of CO2 cost pass-through. Furthermore, our numerical tests reveal pass-through overshifting, occurring even under non-convex market demand conditions. Our results generalize and update some known findings in literature (e.g. Wang and Zhou, 2017; Yu et al., 2021; and Chen et al., 2023) and carry some important implications for energy policy, environmental regulation, and welfare analysis.
期刊介绍：
Managerial and Decision Economics will publish articles applying economic reasoning to managerial decision-making and management strategy.Management strategy concerns practical decisions that managers face about how to compete, how to succeed, and how to organize to achieve their goals. Economic thinking and analysis provides a critical foundation for strategic decision-making across a variety of dimensions. For example, economic insights may help in determining which activities to outsource and which to perfom internally. They can help unravel questions regarding what drives performance differences among firms and what allows these differences to persist. They can contribute to an appreciation of how industries, organizations, and capabilities evolve.
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