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The economic and environmental implications of the US repudiation of the kyoto protocol and the subsequent deals in Bonn and Marrakech

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  • Andreas Löschel
  • Zhong Zhang

Abstract

Taking account of sinks credits as agreed in Bonn and Marrakech, this paper illustrates how market power could be exerted in the absence of the US ratification under Annex 1 trading and explores the potential implications of non-competitive supply behavior for the international market of tradable permits, compliance costs for the remaining Annex 1 countries to meet their revised Kyoto targets, and the environmental effectiveness. Our results show that the US withdrawal from the Kyoto Protocol has great impact on the economic costs and environmental effectiveness of the Protocol since it would lead to no real emission reduction in all remaining Annex 1 regions. Depending on how market power is exerted by the dominant permit suppliers, the former Soviet Union and the Eastern European countries, the overall compliance costs of all remaining Annex 1 regions differ significantly. Moreover, curtailing permit supply by market power increases substantially the overall environmental effectiveness by cutting the amount of hot air being emitted into the atmosphere by more than half, although to much less extent than in the case of the US compliance. --

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Bibliographic Info

Article provided by Springer in its journal Weltwirtschaftliches Archiv.

Volume (Year): 138 (2002)
Issue (Month): 4 (December)
Pages: 711-746

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Handle: RePEc:spr:weltar:v:138:y:2002:i:4:p:711-746

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Keywords: D43; Q43; Q48; Q25;

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References

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  1. Johan Eyckmans & Denise Van Regemorter & Vincent van Steenberghe, 2001. "Is Kyoto fatally flawed? An analysis with MacGEM," Energy, Transport and Environment Working Papers Series ete0118, Katholieke Universiteit Leuven, Centrum voor Economische Studiën, Energy, Transport and Environment.
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  10. Peter Cramton & Suzi Kerr, 2002. "Tradeable Carbon Permit Auctions: How and Why to Auction Not Grandfather," Papers of Peter Cramton 02eptc, University of Maryland, Department of Economics - Peter Cramton, revised 06 May 2002.
  11. Zhang, ZhongXiang, 1998. "Greenhouse gas emissions trading and the world trading system," MPRA Paper 12971, University Library of Munich, Germany.
  12. Misiolek, Walter S. & Elder, Harold W., 1989. "Exclusionary manipulation of markets for pollution rights," Journal of Environmental Economics and Management, Elsevier, vol. 16(2), pages 156-166, March.
  13. Böhringer, Christoph & Löschel, Andreas, 2001. "Market power in international emissions trading : the impact of U.S. withdrawal from the Kyoto Protocol," ZEW Discussion Papers 01-58, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  14. Johannes Bollen & Arjen Gielen & Hans Timmer, 1999. "Clubs, Ceilings and CDM: Macroeconomics of Compliance with the Kyoto Protocol," The Energy Journal, International Association for Energy Economics, vol. 0(Special I), pages 177-206.
  15. Criqui, Patrick & Mima, Silvana & Viguier, Laurent, 1999. "Marginal abatement costs of CO2 emission reductions, geographical flexibility and concrete ceilings: an assessment using the POLES model," Energy Policy, Elsevier, vol. 27(10), pages 585-601, October.
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