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Joint implementation under asymmetric information and strategic behavior

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  • Cathrine Hagem
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    Abstract

    Joint Implementation (JI) under the Framework Convention on Climate Change means that countries could partly offset their national abatement commitments by investing in CO 2 abatement projects abroad. JI is introduced as a mechanism for achieving a certain global abatement target less costly by separating the commitments from the implementation of measures. This paper studies the design of a JI contract when the investor has incomplete information about the foreign firm which carries out the JI project (the host). Asymmetric information leads to a decrease in the potential cost savings from JI. Furthermore, private information held by the potential host firm could give the firm a significant positive utility of participating in JI projects. The possibility of being a host for a JI project in the future can prevent potential host firms from investing in profitable abatement projects today. The paper analyzes the impact on emissions of CO 2 of strategic behavior among potential hosts for JI projects. Copyright Kluwer Academic Publishers 1996

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    File URL: http://hdl.handle.net/10.1007/BF00357412
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    Bibliographic Info

    Article provided by European Association of Environmental and Resource Economists in its journal Environmental & Resource Economics.

    Volume (Year): 8 (1996)
    Issue (Month): 4 (December)
    Pages: 431-447

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    Handle: RePEc:kap:enreec:v:8:y:1996:i:4:p:431-447

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    Web page: http://www.springerlink.com/link.asp?id=100263

    Related research

    Keywords: joint implementation; climate policy; incentive contracts; asymmetric information;

    References

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    1. John Pezzey, 1992. "Analysis of Unilateral CO2 Control in the European Community and OECD," The Energy Journal, International Association for Energy Economics, vol. 0(Number 3), pages 159-172.
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    Cited by:
    1. Cathrine Hagem, 2007. "The clean development mechanism versus international permit trading: the effect on technological change," Discussion Papers 521, Research Department of Statistics Norway.
    2. Suzi Kerr & Catherine Leining, 2003. "Joint Implementation in Climate Change Policy," Working Papers 03_04, Motu Economic and Public Policy Research.
    3. Kolstad, Charles D. & Toman, Michael, 2005. "The Economics of Climate Policy," Handbook of Environmental Economics, in: K. G. Mäler & J. R. Vincent (ed.), Handbook of Environmental Economics, edition 1, volume 3, chapter 30, pages 1561-1618 Elsevier.
    4. Fischer, Carolyn, 2005. "Project-based mechanisms for emissions reductions: balancing trade-offs with baselines," Energy Policy, Elsevier, vol. 33(14), pages 1807-1823, September.
    5. Jon Hovi, 2001. "Decentralized Enforcement, Sequential Bargaining and the Clean Development Mechanism," Nordic Journal of Political Economy, Nordic Journal of Political Economy, vol. 27, pages 135-152.
    6. Fischer, Carolyn, 2002. "Determining Project-Based Emissions Baselines with Incomplete Information," Discussion Papers dp-02-23, Resources For the Future.
    7. Matti Liski & Juha Virrankoski, 2004. "Frictions in Project-Based Supply of Permits," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 28(3), pages 347-365, July.
    8. Toman, Michael, 1998. "Research Frontiers in the Economics of Climate Change," Discussion Papers dp-98-32, Resources For the Future.
    9. Carsten Helm & Franz Wirl, 2011. "International Environmental Agreements: Incentive Contracts with Multilateral Externalities," Working Papers V-336-11, University of Oldenburg, Department of Economics, revised Jun 2011.
    10. Helm, Carsten & Wirl, Franz, 2014. "The principal–agent model with multilateral externalities: An application to climate agreements," Journal of Environmental Economics and Management, Elsevier, vol. 67(2), pages 141-154.
    11. Strand, Jon & Rosendahl, Knut Einar, 2012. "Global emissions effects of CDM projects with relative baselines," Resource and Energy Economics, Elsevier, vol. 34(4), pages 533-548.
    12. Hagem, Cathrine, 2009. "The clean development mechanism versus international permit trading: The effect on technological change," Resource and Energy Economics, Elsevier, vol. 31(1), pages 1-12, January.
    13. repec:old:wpaper:336-11 is not listed on IDEAS

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