Abstract
Using a newly proposed tradable permit market for Nitrogen Oxide control in Kao-shiung and Pint-tung area as an example, this research tries to estimate the potential information costs for permit trading during the sequential and bilateral transaction process when firms are required to reduce their emission by 10% of the year 2000 baseline levels. The results show that the total costs governed by the rule where firms that have the highest and the lowest marginal abatement costs are managed to trade first could be $6.99 million higher than the costs under a perfect competition market structure. The difference could be attributed to the incomplete information among participants in a new trading market. The control agency under this circumstance should try to close the gap through releasing more information of cost structure in each industry and emission records of firms.