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Permit trading and stability of international climate agreements

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Abstract

We analyze the implication of different allocation schemes of CO2-emission permits for stability and the success of international climate agreements. Our model combines a game theoretical with an empirical module that comprises 12 world regions and captures important dynamic aspects of the climate change problem. We consider seven different permit allocation schemes. Two “pragmatic schemes” allocate permits according to a uniform emission reductio quota, five “equitable schemes” allocate permits based on some normative criteria frequently discussed in the literature permit trading can raise participation and the success of climate agreements, but pragmatic schemes are superior to equitable ones.

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File URL: http://www.cema.edu.ar/publicaciones/download/volume9/altamirano.pdf
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Bibliographic Info

Article provided by Universidad del CEMA in its journal Journal of Applied Economics.

Volume (Year): IX (2006)
Issue (Month): (May)
Pages: 19-48

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Handle: RePEc:cem:jaecon:v:9:y:2006:n:1:p:19-48

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Keywords: climate agreements; tradable emission permits; coalition formation; self-enforcing agreements;

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References

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  1. CHANDER, Parkash & TULKENS, Henry, 1995. "The Core of an Economy with Multilateral Environmental Externalities," CORE Discussion Papers, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) 1995050, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
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  4. Adam Rose & Brandt Stevens & Jae Edmonds & Marshall Wise, 1998. "International Equity and Differentiation in Global Warming Policy," Environmental & Resource Economics, European Association of Environmental and Resource Economists, European Association of Environmental and Resource Economists, vol. 12(1), pages 25-51, July.
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  8. Hans-Peter Weikard & Michael Finus & Juan-Carlos Altamirano-Cabrera, 2006. "The impact of surplus sharing on the stability of international climate agreements," Oxford Economic Papers, Oxford University Press, Oxford University Press, vol. 58(2), pages 209-232, April.
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  12. Michael Finus & Juan-Carlos Altamirano-Cabrera & Ekko Ierland, 2005. "The effect of membership rules and voting schemes on the success of international climate agreements," Public Choice, Springer, Springer, vol. 125(1), pages 95-127, July.
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  14. GERMAIN, Marc & VAN STEENBERGHE, Vincent, 2001. "Constraining equitable allocations of tradable greenhouse gases emission quotas by acceptability," CORE Discussion Papers, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) 2001005, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
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Citations

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Cited by:
  1. Dritan Osmani, . "A note on optimal transfer schemes, stable coalition for environmental protection and joint maximization assumption," Working Papers, Research unit Sustainability and Global Change, Hamburg University FNU-176, Research unit Sustainability and Global Change, Hamburg University.
  2. Carlo Carraro & Valentina Bosetti & Enrica De Cian & Romain Duval & Emanuele Massetti & Massimo Tavoni, 2009. "The incentives to participate in and the stability of international climate coalitions: a game theoretic approach using the WITCH Model," Working Papers, Department of Economics, University of Venice "Ca' Foscari" 2009_28, Department of Economics, University of Venice "Ca' Foscari".
  3. Carlo Carraro & Johan Eyckmans & Michael Finus, 2005. "Optimal Transfers and Participation Decisions in International Environmental Agreements," Working Papers, Fondazione Eni Enrico Mattei 2005.50, Fondazione Eni Enrico Mattei.
  4. Johan Eyckmans & Michael Finus, 2004. "An Almost Ideal Sharing Scheme for Coalition Games with Externalities," Working Papers, Fondazione Eni Enrico Mattei 2004.155, Fondazione Eni Enrico Mattei.
  5. Thomas Norman & Heinrich H. Nax, 2011. "Leading the Way: Coalitional Stability in Technological Cooperation & Sequential Climate Policy," Economics Series Working Papers, University of Oxford, Department of Economics 585, University of Oxford, Department of Economics.
  6. Kai Lessmann & Ulrike Kornek & Valentina Bosetti & Rob Dellink & Johannes Emmerling & Johan Eyckmans & Miyuki Nagashima & Hans-Peter Weikard & Zili Yang, 2014. "The Stability and Effectiveness of Climate Coalitions: A Comparative Analysis of Multiple Integrated Assessment Models," Working Papers, Fondazione Eni Enrico Mattei 2014.05, Fondazione Eni Enrico Mattei.
  7. Peter Egger & Christoph Jeßberger & Mario Larch, 2011. "Trade and investment liberalization as determinants of multilateral environmental agreement membership," International Tax and Public Finance, Springer, Springer, vol. 18(6), pages 605-633, December.
  8. Lessmann, Kai & Marschinski, Robert & Finus, Michael & Kornek, Ulrike & Edenhofer, Ottmar, 2012. "Emissions Trading with Non-signatories in a Climate Agreement : An Analysis of Coalition Stability," Department of Economics Working Papers, University of Bath, Department of Economics 32512, University of Bath, Department of Economics.
  9. Hans-Peter Weikard & Rob Dellink, 2008. "Sticks and Carrots for the Design of International Climate Agreements with Renegotiations," Working Papers, Fondazione Eni Enrico Mattei 2008.26, Fondazione Eni Enrico Mattei.
  10. M Sáiz & Eligius Hendrix & Niels Olieman, 2006. "On the Computation of Stability in Multiple Coalition Formation Games," Computational Economics, Society for Computational Economics, Society for Computational Economics, vol. 28(3), pages 251-275, October.
  11. Astrid Dannenberg & Bodo Sturm & Carsten Vogt, 2010. "Do Equity Preferences Matter for Climate Negotiators? An Experimental Investigation," Environmental & Resource Economics, European Association of Environmental and Resource Economists, European Association of Environmental and Resource Economists, vol. 47(1), pages 91-109, September.
  12. Michael Finus & Bianca Rundshagen, 2009. "Membership rules and stability of coalition structures in positive externality games," Social Choice and Welfare, Springer, Springer, vol. 32(3), pages 389-406, March.
  13. Fabio Sferra & Massimo Tavoni, 2013. "Endogenous Participation in a Partial Climate Agreement with Open Entry: A Numerical Assessment," Working Papers, Fondazione Eni Enrico Mattei 2013.60, Fondazione Eni Enrico Mattei.
  14. Valentina Bosetti & Carlo Carraro & Enrica De Cian & Romain Duval & Emanuele Massetti & Massimo Tavoni, 2009. "The Incentives to Participate in, and the Stability of, International Climate Coalitions: A Game-theoretic Analysis Using the Witch Model," Working Papers, Fondazione Eni Enrico Mattei 2009.64, Fondazione Eni Enrico Mattei.
  15. Hans-Peter Weikard & Rob Dellink & Ekko Ierland, 2010. "Renegotiations in the Greenhouse," Environmental & Resource Economics, European Association of Environmental and Resource Economists, European Association of Environmental and Resource Economists, vol. 45(4), pages 573-596, April.

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