This paper constructs a model of an Emission Trading Scheme (ETS) market using bid-ask spreads. We show that when such a market is dominated by a small number of traders with substantial market power, they tend to maximize their profits by widening bid-ask spreads, thereby reducing market liquidity. We argue that adding more market participants, including derivatives traders, can alleviate this illiquidity problem. Policy changes at the European Union's ETS illustrate our theory, as the market significantly increased liquidity by enacting liquidity-provision policies to attract more participants as it transitioned from Phase 1 to Phase 2.

中文翻译：

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改善排放交易计划的流动性

本文构建了一个使用买卖价差的排放交易计划 (ETS) 市场模型。我们表明，当这样的市场由少数具有强大市场力量的交易者主导时，他们倾向于通过扩大买卖价差来最大化利润，从而降低市场流动性。我们认为，增加更多的市场参与者，包括衍生品交易员，可以缓解这种流动性不足的问题。欧盟 ETS 的政策变化说明了我们的理论，因为当市场从第一阶段过渡到第二阶段时，市场通过制定流动性提供政策来吸引更多参与者，从而显着增加了流动性。