Re: green permits and taxes

[PHILLPS]

Barkely and Robin,
  Correct me if I am off track here, but if permits are
distributed free (based on some past pattern), or if they
are initially priced below social cost, and then a
tradeable permit market created, does this not act as
a barrier to the entry of new firms who must buy up
permits at full market price in order to produce?  Of
course, if permits had to be bought up every 6 mos or
year, that would tend to equalize the capital cost in
subsequent periods but it would still be an extra entry
cost for new firms.  This would not be the case for
taxes.  Does this make sense?

Paul Phillips,
Economics,
University of Manitoba