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The efficiency of voluntary pollution abatement when countries can commit

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  • Boadway, Robin
  • Song, Zhen
  • Tremblay, Jean-François

Abstract

We characterize a mechanism for reducing pollution emissions in which countries, acting non-cooperatively, commit to matching each others' abatement levels and may subsequently engage in emissions quota trading. The mechanism leads to an efficient level of emissions, and if the matching abatements process includes a quota trading stage, the marginal benefits of emissions are also equalized across countries. Given equilibrium matching rates, the initial allocation of emission quotas (before trading) reflects each country's marginal valuation for lower pollution relative to its marginal benefit from emissions. These results hold for any number of countries, in an environment where countries have different abatement technologies and different benefits from emissions, and even if the emissions of countries are imperfect substitutes in each country's damage function. In a two-period setting, the mechanism achieves both intra- and inter-temporal efficiency.

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Bibliographic Info

Article provided by Elsevier in its journal European Journal of Political Economy.

Volume (Year): 27 (2011)
Issue (Month): 2 (June)
Pages: 352-368

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Handle: RePEc:eee:poleco:v:27:y:2011:i:2:p:352-368

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Web page: http://www.elsevier.com/locate/inca/505544

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Keywords: Voluntary pollution abatement Matching commitments Emissions quota trading;

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References

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  1. Gerber, Anke & Wichardt, Philipp C., 2009. "Providing public goods in the absence of strong institutions," Journal of Public Economics, Elsevier, vol. 93(3-4), pages 429-439, April.
  2. Gersbach, Hans & Winkler, Ralph, 2007. "On the Design of Global Refunding and Climate Change," CEPR Discussion Papers 6379, C.E.P.R. Discussion Papers.
  3. Danziger, Leif & Schnytzer, Adi, 1991. "Implementing the Lindahl voluntary-exchange mechanism," European Journal of Political Economy, Elsevier, vol. 7(1), pages 55-64, April.
  4. Shilony, Yuval, 2000. "Diversity and ingenuity in voluntary collective action," European Journal of Political Economy, Elsevier, vol. 16(3), pages 429-443, September.
  5. Robin Boadway & Zhen Song & Jean-Francois Tremblay, 2006. "Commitment and Matching Contributions to Public Goods," Working Papers 1067, Queen's University, Department of Economics.
  6. Martin Altemeyer-Bartscher & Dirk T. G. Rübbelke & Eytan Sheshinski, 2010. "Environmental Protection and the Private Provision of International Public Goods," Economica, London School of Economics and Political Science, vol. 77(308), pages 775-784, October.
  7. Guttman, Joel M, 1978. "Understanding Collective Action: Matching Behavior," American Economic Review, American Economic Association, vol. 68(2), pages 251-55, May.
  8. Varian, Hal R., 1994. "Sequential contributions to public goods," Journal of Public Economics, Elsevier, vol. 53(2), pages 165-186, February.
  9. Roberts, Marc J. & Spence, Michael, 1976. "Effluent charges and licenses under uncertainty," Journal of Public Economics, Elsevier, vol. 5(3-4), pages 193-208.
  10. Yukihiro Nishimura, 2008. "A Lindahl Solution to International Emissions Trading," Working Papers 1177, Queen's University, Department of Economics.
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Citations

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Cited by:
  1. Wolfgang Buchholz & Richard Cornes & Dirk Rübbelke, 2012. "Potentially Harmful International Cooperation on Global Public Good Provision," ANU Working Papers in Economics and Econometrics 2012-584, Australian National University, College of Business and Economics, School of Economics.
  2. Buchholz, Wolfgang & Cornes, Richard & Rübbelke, Dirk, 2011. "Interior matching equilibria in a public good economy: An aggregative game approach," Journal of Public Economics, Elsevier, vol. 95(7), pages 639-645.
  3. Boadway, Robin & Song, Zhen & Tremblay, Jean-François, 2013. "Non-cooperative pollution control in an inter-jurisdictional setting," Regional Science and Urban Economics, Elsevier, vol. 43(5), pages 783-796.
  4. Olivier Bos & Béatrice Roussillon & Paul Schweinzer, 2013. "Agreeing on Efficient Emissions Reduction," CESifo Working Paper Series 4345, CESifo Group Munich.
  5. Guttman, Joel M., 2013. "On the evolution of conditional cooperation," European Journal of Political Economy, Elsevier, vol. 30(C), pages 15-34.
  6. Martin Altemeyer-Bartscher & Anil Markandya & Dirk T.G. Rübbelke, 2011. "The Private Provision of International Impure Public Goods: the Case of Climate Policy," Working Papers 2011-09, BC3.

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