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Is International Emissions Trading Always Beneficial?

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  • Mustafa Babiker, John Reilly and Laurent Viguier

Abstract

Economic efficiency is a major argument for international emissions trading under the Kyoto Protocol. We show that permit trading can be welfare decreasing for countries, even though private trading parties benefit. The result is a case of "immiserizing" growth in the sense of Bhagwati where the negative terms of trade and tax interaction effects wipe out the gains from trading. Simulation and welfare decomposition results based on a CGE model of the global economy show that under EU-wide trading countries that are net permit sellers generally lose, due primarily to the existence of distortionary energy taxes.

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Bibliographic Info

Article provided by International Association for Energy Economics in its journal The Energy Journal.

Volume (Year): Volume 25 (2004)
Issue (Month): Number 2 ()
Pages: 33-56

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Handle: RePEc:aen:journl:2004v25-02-a02

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Citations

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  1. > Environmental and Natural Resource Economics > Climate economics > Policy instruments
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Cited by:
  1. Bouwe Dijkstra & Edward Manderson & Tae-Yeoun Lee, 2011. "Extending the Sectoral Coverage of an International Emission Trading Scheme," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 50(2), pages 243-266, October.
  2. Christoph Böhringer & Dijkstra Bouwe & Knut Einar Rosendahl, 2011. "Sectoral and Regional Expansion of Emissions Trading," Working Papers V-337-11, University of Oldenburg, Department of Economics, revised Jun 2011.
  3. Julien Chevallier, 2009. "Emissions Trading: What Makes It Work?," Working Papers halshs-00401725, HAL.
  4. repec:old:wpaper:337-11 is not listed on IDEAS
  5. Alessandro Antimiani & Valeria Costantini & Chiara Martini & Luca Salvatici, 2011. "Cooperative and non-cooperative solutions to carbon leakage," Departmental Working Papers of Economics - University 'Roma Tre' 0136, Department of Economics - University Roma Tre.
  6. Bernard, A. & Haurie, A. & Vielle, M. & Viguier, L., 2008. "A two-level dynamic game of carbon emission trading between Russia, China, and Annex B countries," Journal of Economic Dynamics and Control, Elsevier, vol. 32(6), pages 1830-1856, June.
  7. Akın Olçum, Gökçe & Yeldan, Erinç, 2013. "Economic impact assessment of Turkey's post-Kyoto vision on emission trading," Energy Policy, Elsevier, vol. 60(C), pages 764-774.
  8. Marschinski, Robert & Flachsland, Christian & Jakob, Michael, 2012. "Sectoral linking of carbon markets: A trade-theory analysis," Resource and Energy Economics, Elsevier, vol. 34(4), pages 585-606.
  9. Reilly, J. & Paltsev, S. & Felzer, B. & Wang, X. & Kicklighter, D. & Melillo, J. & Prinn, R. & Sarofim, M. & Sokolov, A. & Wang, C., 2007. "Global economic effects of changes in crops, pasture, and forests due to changing climate, carbon dioxide, and ozone," Energy Policy, Elsevier, vol. 35(11), pages 5370-5383, November.
  10. Olivier Godard, 2011. "Climate justice, between global and international justice -Insights from justification theory," RSCAS Working Papers 2011/56, European University Institute.
  11. Webster, Mort & Paltsev, Sergey & Reilly, John, 2010. "The hedge value of international emissions trading under uncertainty," Energy Policy, Elsevier, vol. 38(4), pages 1787-1796, April.
  12. Peter Wood & Frank Jotzo, 2009. "Price Floors for Emissions Trading," Environmental Economics Research Hub Research Reports 0936, Environmental Economics Research Hub, Crawford School of Public Policy, The Australian National University.
  13. Haar, Laura N. & Haar, Lawrence, 2006. "Policy-making under uncertainty: Commentary upon the European Union Emissions Trading Scheme," Energy Policy, Elsevier, vol. 34(17), pages 2615-2629, November.
  14. Christoph Bohringer & Heinz Welsch, 2006. "Burden sharing in a greenhouse: egalitarianism and sovereignty reconciled," Applied Economics, Taylor & Francis Journals, vol. 38(9), pages 981-996.
  15. Alain Bernard & Marc Vielle & Laurent Viguier, 2005. "Premières simulations de la directive européenne sur les quotas d'émission avec le modèle GEMINI-E3," Économie et Prévision, Programme National Persée, vol. 169(3), pages 171-196.
  16. De Cian, Enrica & Tavoni, Massimo, 2012. "Do technology externalities justify restrictions on emission permit trading?," Resource and Energy Economics, Elsevier, vol. 34(4), pages 624-646.
  17. Bouwe R. Dijkstra & Edward Manderson & Tae-Yeoun Lee, . "Partial International Emission Trading," Discussion Papers 08/27, University of Nottingham, GEP.
  18. Vielle, Marc & Viguier, Laurent, 2007. "On the climate change effects of high oil prices," Energy Policy, Elsevier, vol. 35(2), pages 844-849, February.

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