Trade of Permits for Greenhouse Gas Emissions; Bilateral Trade Need not Be the Answer
AbstractThe Kyoto Protocol sets national quotas on CO2 emissions and allows international trade of these quotas. We argue that this trade is characterized by asymmetric, identity-dependent externalities, and show that bilateral trade may not be sufficient for an efficient allocation of emissions. We derive conditions under which bilateral trade does improve the allocation of permits. The conditions are strong. In this sense, we argue that, for emissions permits, market design matters.
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Bibliographic InfoPaper provided by Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC) in its series UFAE and IAE Working Papers with number 746.08.
Date of creation: 30 May 2007
Date of revision:
Terms of trade; asymmetric externalities; permits trade;
Other versions of this item:
- Roberto Burguet & Jaume Sempere, 2010. "Trade of Permits for Greenhouse Gas Emissions: Bilateral Trade Need not be the Answer," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 46(4), pages 495-509, August.
- Roberto Burguet & Jaume Sempere, 2007. "Trade of Permits for Greenhouse Gas Emissions; Bilateral Trade Need not Be the Answer," Working Papers 350, Barcelona Graduate School of Economics.
- D62 - Microeconomics - - Welfare Economics - - - Externalities
- F18 - International Economics - - Trade - - - Trade and Environment
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