An Economic Theory of Emission Cap Determination by an International Agreement
AbstractWe attempt to clarify the problem of determination of national emission endowments under the Kyoto protocol. We argue that many issues, such as assigning culpability and compensation for the current global stock of carbon and the linking of emission endowments to per capita entitlements, are better handled through direct lump-sum transfers and not via distortions of the endowments of emission flows. Given these arguments, we model the distribution of endowments as equilibrium of a non-cooperative game. This framework allows us to make qualitative predictions about the impact of international differences on the pattern of emission caps. We also perform simple comparative statistic exercises that predict how the equilibrium caps vary with parametric changes. Moreover, we study how nations can manipulate the emission caps by strategic investment in technology and damage control.
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Bibliographic InfoPaper provided by Centre for Development Economics, Delhi School of Economics in its series Working papers with number 88.
Length: 25 pages
Date of creation: Dec 2000
Date of revision:
Find related papers by JEL classification:
- C7 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory
- Q2 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation
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- Stavins, Robert & Hahn, Robert, 1999. "What Has Kyoto Wrought? The Real Architecture of International Tradable Permit Markets," Discussion Papers dp-99-30, Resources For the Future.
- Barrett, Scott, 1994. "Self-Enforcing International Environmental Agreements," Oxford Economic Papers, Oxford University Press, vol. 46(0), pages 878-94, Supplemen.
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