Elies Lucio

A kilogram of gold refined from a licensed mine and a kilogram refined from a pit held by an armed group are the same object: origin is a claim about a transaction rather than an attribute of the metal. This property has impeded international efforts to restrain illegal mining by regulating its buyers. I model the trade as a mechanism designed by the party holding a producing region's only route to world markets. His control extends to both mineral exports and imported necessities and inputs, allowing him to recover procurement payments through import margins while choosing the coercion needed to sustain household participation. Regional supply therefore depends on the terms of these interlinked transactions: when households lack the resources to finance subsistence, a lower mining return can induce more mining labor. He uses competition among buyers together with his own laundering capacity, bidding his marginal laundering profit inside his own auction to floor his profit and extracting above that floor whatever competition will bear. I characterize when this strategy absorbs demand-side regulation: taxed buyers are displaced, the good is optimally reallocated toward non-compliant ones, and purchases from the producing region are unchanged. Requiring instead a credible record bound to the unit at extraction, an object the seller cannot supply, breaks the pooling: the market separates into two priced segments and the unverified price falls strictly below the pooled price. The wedge this opens acts as a scissor on illegal extraction. Globally, it redirects innovation toward verifiable supply, which gains both a price advantage and access to world demand. Locally, it reverses the regulator's ranking of protection and enforcement, since the bribe received is indexed to the depressed price and his prospective tax base to the elevated one, so, once fiscal gains exceed intervention costs and foregone rents, the actor whose income depended on suppressing the state maximizes it by building the state.

A carbon price changes both the return to emitting and the value of an allowance held as collateral. We study how those channels affect the design of taxes, tradable caps, and price collars. With jointly concave production, investment can complement or substitute for emissions. Optimizing investment yields a heterogeneous reduced emissions valuation and an exact price–quantity welfare comparison governed by curvature and shock covariance. The sign of production complementarity alone does not select the preferred instrument. For finite uncertainty, we characterize the globally optimal collar through a finite collection of convex quadratic programs. We then introduce investment finance before operating receipts. A higher carbon price can raise investment through collateral even when its unconstrained incentive effect points the other way. Financing thresholds and a cash-equivalence result identify when auction shares and timely transfers have real effects. A reproducible joint-design example shows how the preferred revenue rule changes when public bridge finance becomes available. Forest conversion and Brazilian institutions identify application margins and the data needed to discipline the model.

A common carbon market gives a Southern firm a buyer for the allowances it does not use. That opportunity changes the return to clean investment and, when sale proceeds arrive, the funds available to undertake it. We develop a North–South investment economy in which firms own emissions rights, the North improves technology, and the South chooses between clean and dirty imitation. Spot production and allowance prices clear jointly; private investment programs and dividend retention are optimized subject to cash arriving after investment has been paid. We characterize when clean productivity frees allowances, when the additional exports increase revenue despite a falling permit price, and when Southern productivity rises relative to a moving Northern frontier. An exhaustively solved finite investment economy exhibits both higher Southern clean productivity and faster relative catch-up under linkage. The same cash injection under fragmentation instead finances dirty investment. Other parameter configurations also direct additional trading income toward dirty production. The contribution is a conditional account of how a market for unused allowances can finance industrial catch-up, with the price incentive, initial entitlement rents, and subsequent sale proceeds kept in separate accounts.