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What to Expect from an International System of Tradable Permits for Carbon Emmisions

Author

Listed:
  • Warwick J. McKibbin

    (Australian National University, Research School of Pacific and Asian Studies, Economics Division
    The Brookings Institution)

  • Robert Shackleton

    (U.S. Environmental Protection Agency, Policy Office)

  • Peter J. Wilcoxen

    (University of Texas, Economics Department
    The Brookings Institution)

Abstract

We use an econometrically estimated multi-region, multi-sector general equilibrium model of the world economy to examine the effects of using a system of internationally tradable emission permits to control world carbon dioxide emissions. We focus, in particular, on the effects of the system on flows of trade and international capital. Our results show that international trade and capital flows significantly alter projections of the domestic effects of the emissions mitigation policy, compared with analyses that ignore international capital flows, and that under some systems of international permit trading the United States is likely to become a significant permit seller, the opposite of conventional wisdom.

Suggested Citation

  • Warwick J. McKibbin & Robert Shackleton & Peter J. Wilcoxen, 1998. "What to Expect from an International System of Tradable Permits for Carbon Emmisions," Economics and Environment Network Working Papers 9804, Australian National University, Economics and Environment Network.
    • Handle: RePEc:anu:eenwps:9804
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    Cited by:

    1. Marschinski, Robert & Flachsland, Christian & Jakob, Michael, 2012. "Sectoral linking of carbon markets: A trade-theory analysis," Resource and Energy Economics, Elsevier, vol. 34(4), pages 585-606.
    2. De Cian, Enrica & Tavoni, Massimo, 2012. "Do technology externalities justify restrictions on emission permit trading?," Resource and Energy Economics, Elsevier, vol. 34(4), pages 624-646.
    3. Weitzel, Matthias & Ghosh, Joydeep & Peterson, Sonja & Pradhan, Basanta K., 2015. "Effects of international climate policy for India: evidence from a national and global CGE model," Environment and Development Economics, Cambridge University Press, vol. 20(4), pages 516-538, August.
    4. Hongbo Duan, Lei Zhu, Gürkan Kumbaroglu, and Ying Fan, 2016. "Regional Opportunities for China To Go Low-Carbon: Results from the REEC Model," The Energy Journal, International Association for Energy Economics, vol. 0(China Spe).
    5. Warwick J McKibbin & Robert Shackleton & Peter J Wilcoxen, 1998. "The Potential Effects of International Carbon Emissions Permit Trading," Departmental Working Papers 1998-09, The Australian National University, Arndt-Corden Department of Economics.
    6. Gunter Stephan & Georg M ller-F rstenberger, 2003. "Does Distribution Matter? When Flexibility, Equity and Efficiency in Greenhouse Gas Abatement," Diskussionsschriften dp0301, Universitaet Bern, Departement Volkswirtschaft.
    7. Manne, Alan S. & Stephan, Gunter, 2005. "Global climate change and the equity–efficiency puzzle," Energy, Elsevier, vol. 30(14), pages 2525-2536.
    8. Warwick J. McKibbin, 2007. "From National to International Climate Change Policy," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 40(4), pages 410-420, December.
    9. Copeland, Brian R. & Taylor, M. Scott, 2005. "Free trade and global warming: a trade theory view of the Kyoto protocol," Journal of Environmental Economics and Management, Elsevier, vol. 49(2), pages 205-234, March.
    10. Balistreri, Edward J. & McDaniel, Christine A. & Wong, Eina Vivian, 2003. "An estimation of US industry-level capital-labor substitution elasticities: support for Cobb-Douglas," The North American Journal of Economics and Finance, Elsevier, vol. 14(3), pages 343-356, December.
    11. 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.
    12. Warwick J. McKibbin & Robert Shackleton & Peter J. Wilcoxen, 1998. "The Potential Effects of International Carbon Emissions Permit Trading Under the Kyoto Protocol," Economics and Environment Network Working Papers 9805, Australian National University, Economics and Environment Network.
    13. Edward J. Balistreri & Christine A. McDaniel & Eina Vivian Wong, 2003. "An Estimation of U.S. Industry-Level Capital-Labor Substitution," Computational Economics 0303001, University Library of Munich, Germany.
    14. Claudia Kemfert, Truong P. Truong, and Thomas Bruckner, 2006. "Economic Impact Assessment of Climate Change - A Multi-gas Investigation with WIAGEM-GTAPEL-ICM," The Energy Journal, International Association for Energy Economics, vol. 0(Special I), pages 441-460.
    15. Luìs, Galindo & Giulio, Guarini & Gabriel, Porcile, 2020. "Environmental innovations, income distribution, international competitiveness and environmental policies: a Kaleckian growth model with a balance of payments constraint," Structural Change and Economic Dynamics, Elsevier, vol. 53(C), pages 16-25.
    16. Springer, Urs, 2003. "The market for tradable GHG permits under the Kyoto Protocol: a survey of model studies," Energy Economics, Elsevier, vol. 25(5), pages 527-551, September.
    17. Marc VIELLE & Laurent VIGUIER & Alain HAURIE & Alain BERNARD, 2010. "A Two-level Computable Equilibrium Model to Assess the Strategic Allocation of Emission Allowances Within the European Union," EcoMod2004 330600153, EcoMod.
    18. Gunter Stephan & Georg Müller-Fürstenberger, 2004. "Does Distribution Matter? Efficiency, Equity and Flexibility in Greenhouse Gas Abatement," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 27(1), pages 87-107, January.
    19. Warwick J. McKibbin & Peter J. Wilcoxen, 2006. "A Credible Foundation For Long Term International Cooperation On Climate Change," CAMA Working Papers 2006-15, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
    20. Mario A. Fernandez & Adam J. Daigneault, 2018. "Money Does Grow On Trees: Impacts Of The Paris Agreement On The New Zealand Economy," Climate Change Economics (CCE), World Scientific Publishing Co. Pte. Ltd., vol. 9(03), pages 1-23, August.
    21. McKibbin, Warwick J. & Wilcoxen, Peter J., 2013. "A Global Approach to Energy and the Environment," Handbook of Computable General Equilibrium Modeling, in: Peter B. Dixon & Dale Jorgenson (ed.), Handbook of Computable General Equilibrium Modeling, edition 1, volume 1, chapter 0, pages 995-1068, Elsevier.
    22. Donald Larson & Gunnar Breustedt, 2009. "Will Markets Direct Investments Under the Kyoto Protocol? Lessons from the Activities Implemented Jointly Pilots," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 43(3), pages 433-456, July.
    23. Daniel Dudek & Alexander Golub & Annie Petsonk & George Safonov & Mikhail Saparov, 2002. "Emission inventory on company level: lessons from Russia," Mitigation and Adaptation Strategies for Global Change, Springer, vol. 7(2), pages 155-172, June.
    24. Conrad, Klaus, 2001. "Computable General equilibrium Models in Environmental and Resource Economics," Discussion Papers 601, Institut fuer Volkswirtschaftslehre und Statistik, Abteilung fuer Volkswirtschaftslehre.

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    More about this item

    Keywords

    tradable permits; international capital flows; policy;
    All these keywords.

    JEL classification:

    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy
    • F30 - International Economics - - International Finance - - - General
    • O20 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - General

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