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Emissions trading beyond Europe: Linking schemes in a post-Kyoto world

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  • Anger, Niels
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    Abstract

    This paper assesses the economic impacts of linking the EU emissions trading scheme (ETS) to emerging schemes beyond Europe in the presence of a post-Kyoto agreement in 2020. Numerical simulations with a multi-country equilibrium model of the global carbon market show that linking the European ETS induces only minor economic benefits. As trading is restricted to energy-intensive companies that are assigned high initial emissions, the major compliance burden is carried by the non-trading industries excluded from the linked ETS. In the presence of parallel government trading under a post-Kyoto Protocol, the burden of the excluded sectors can be substantially alleviated by international permit trade at the country level. However, the parallel carbon markets of linked ETS companies and post-Kyoto governments are still separated here. From an efficiency perspective, the most desirable future climate policy regime is thus represented by a joint trading system facilitating international emissions trading between ETS companies and post-Kyoto governments. While the Clean Development Mechanism is not able to attenuate the inefficiencies within linked ETS, in a parallel or joint trading regime the economy-wide access to project-based abatement options in developing countries induces large additional cost-savings.

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    Bibliographic Info

    Article provided by Elsevier in its journal Energy Economics.

    Volume (Year): 30 (2008)
    Issue (Month): 4 (July)
    Pages: 2028-2049

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    Handle: RePEc:eee:eneeco:v:30:y:2008:i:4:p:2028-2049

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    Web page: http://www.elsevier.com/locate/eneco

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    References

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    1. Springer, Urs, 2003. "The market for tradable GHG permits under the Kyoto Protocol: a survey of model studies," Energy Economics, Elsevier, Elsevier, vol. 25(5), pages 527-551, September.
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    4. Anger, Niels & Böhringer, Christoph & Lange, Andreas, 2006. "Differentiation of Green Taxes: A Political-Economy Analysis for Germany," ZEW Discussion Papers 06-03, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
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    9. Anger, Niels & Böhringer, Christoph & Moslener, Ulf, 2007. "Macroeconomic Impacts of the Clean Development Mechanism: The Role of Investment Barriers and Regulations," ZEW Discussion Papers 07-026, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
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    Cited by:
    1. Jotzo, Frank & Betz, Regina, 2009. "Linking the Australian Emissions Trading Scheme," Research Reports, Australian National University, Environmental Economics Research Hub 94814, Australian National University, Environmental Economics Research Hub.
    2. Nazifi, Fatemeh, 2013. "Modelling the price spread between EUA and CER carbon prices," Energy Policy, Elsevier, vol. 56(C), pages 434-445.
    3. Oberndorfer, Ulrich, 2009. "EU Emission Allowances and the stock market: Evidence from the electricity industry," Ecological Economics, Elsevier, vol. 68(4), pages 1116-1126, February.
    4. Halkos, George, 2014. "The Economics of Climate Change Policy: Critical review and future policy directions," MPRA Paper 56841, University Library of Munich, Germany.
    5. Patrick Laurency & Dirk Schindler, 2011. "International Climate Agreements, Cost Reductions and Convergence of Partisan Politics," CESifo Working Paper Series 3591, CESifo Group Munich.
    6. Sathaye, Jayant A. & Anger, Niels, 2008. "Reducing Deforestation and Trading Emissions: Economic Implications for the post-Kyoto Carbon Market," ZEW Discussion Papers 08-016, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
    7. Flachsland, Christian & Marschinski, Robert & Edenhofer, Ottmar, 2009. "Global trading versus linking: Architectures for international emissions trading," Energy Policy, Elsevier, vol. 37(5), pages 1637-1647, May.
    8. Löschel, Andreas & Alexeeva-Talebi, Victoria & Mennel, Tim, 2008. "Climate Policy and the Problem of Competitiveness: Border Tax Adjustments or Integrated Emission Trading?," ZEW Discussion Papers 08-061, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
    9. Mizrach, Bruce, 2012. "Integration of the global carbon markets," Energy Economics, Elsevier, Elsevier, vol. 34(1), pages 335-349.
    10. Christian Flachsland & Steffen Brunner & Ottmar Edenhofer & Felix Creutzig, 2010. "Climate policies for road transport revisited (II): Closing the policy gap with cap-and-trade," Working Papers, Department of Climate Change Economics, TU Berlin 2, Department of Climate Change Economics, TU Berlin.
    11. Duscha, Vicki & Schumacher, Katja & Schleich, Joachim & Buisson, Pierre, 2013. "Costs of meeting international climate targets without nuclear power," Working Papers "Sustainability and Innovation" S7/2013, Fraunhofer Institute for Systems and Innovation Research (ISI).
    12. 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.
    13. Ange Nsouadi & Jules Sadefo Kamdem & Michel Terraza, 2013. "Analyse temps-fréquence de la relation entre les prix du quota et du crédit carbone," Working Papers, LAMETA, Universtiy of Montpellier 13-12, LAMETA, Universtiy of Montpellier, revised Nov 2013.
    14. Anger, Niels & Oberndorfer, Ulrich, 2008. "Firm performance and employment in the EU emissions trading scheme: An empirical assessment for Germany," Energy Policy, Elsevier, vol. 36(1), pages 12-22, January.
    15. Oberndorfer, Ulrich, 2008. "EU Emission Allowances and the Stock Market: Evidence from the Electricity Industry," ZEW Discussion Papers 08-059, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
    16. Anger, Niels & Alexeeva-Talebi, Victoria & Löschel, Andreas, 2008. "Alleviating Adverse Implications of EU Climate Policy on Competitiveness: The Case for Border Tax Adjustments or the Clean Development Mechanism?," ZEW Discussion Papers 08-095, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
    17. Marschinski, Robert & Flachsland, Christian & Jakob, Michael, 2012. "Sectoral linking of carbon markets: A trade-theory analysis," Resource and Energy Economics, Elsevier, Elsevier, vol. 34(4), pages 585-606.

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