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International Environmental Agreements: Emissions trade, safety valves and escape clauses

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  • Karp, Larry
  • Zhao, Jinhua

Abstract

We explain how the structure of multi-national or multi-regional environmental agreements affect their chance of success. Trade in emissions permits has ambiguous and in some cases surprising effects on both the equilibrium level of abatement, and on the ability to persuade nations or regions to participate in environmental agreements. An escape clause policy and a safety valve policy have essentially the same properties when membership in environmental agreement is pre-determined, but they create markedly different effects on the incentives to join such an agreement. The two policies lead to a qualitative difference in the leverage that a potential member of the agreement exercises on other members.

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Bibliographic Info

Paper provided by Department of Agricultural & Resource Economics, UC Berkeley in its series Department of Agricultural & Resource Economics, UC Berkeley, Working Paper Series with number qt1rs9r7z9.

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Date of creation: 14 Feb 2012
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Handle: RePEc:cdl:agrebk:qt1rs9r7z9

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Related research

Keywords: Kyoto Protocol; escape clause; emissions trade; cost uncertainty; participation game; International Environmental Agreement;

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References

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  1. Stranlund, John K & Chavez, Carlos A, 2000. "Effective Enforcement of a Transferable Emissions Permit System with a Self-Reporting Requirement," Journal of Regulatory Economics, Springer, vol. 18(2), pages 113-31, September.
  2. Malik, Arun S., 1990. "Markets for pollution control when firms are noncompliant," Journal of Environmental Economics and Management, Elsevier, vol. 18(2), pages 97-106, March.
  3. Robert N. Stavins, 2008. "Addressing Climate Change with a Comprehensive U.S. Cap-and-Trade System," Working Papers 2008.67, Fondazione Eni Enrico Mattei.
  4. Matthew McGinty, 2007. "International environmental agreements among asymmetric nations," Oxford Economic Papers, Oxford University Press, vol. 59(1), pages 45-62, January.
  5. Karp, Larry & Zhang, Jiangfeng, 2006. "Regulation with anticipated learning about environmental damages," Journal of Environmental Economics and Management, Elsevier, vol. 51(3), pages 259-279, May.
  6. Newell, Richard G. & Pizer, William A., 2003. "Regulating stock externalities under uncertainty," Journal of Environmental Economics and Management, Elsevier, vol. 45(2, Supple), pages 416-432, March.
  7. Hoel, Michael & Karp, Larry, 2001. "Taxes versus Quotas for a Stock Pollutant," Department of Agricultural & Resource Economics, UC Berkeley, Working Paper Series qt5fx9p7kf, Department of Agricultural & Resource Economics, UC Berkeley.
  8. Hoel, Michael & Karp, Larry, 2001. "Taxes and quotas for a stock pollutant with multiplicative uncertainty," Journal of Public Economics, Elsevier, vol. 82(1), pages 91-114, October.
  9. Stiglitz Joseph, 2006. "A New Agenda for Global Warming," The Economists' Voice, De Gruyter, vol. 3(7), pages 1-4, July.
  10. Karp, Larry & Zhao, Jinhua, 2007. "A proposal to reform the Kyoto Protocol : the role of escape clauses and foresight," CUDARE Working Paper Series 1050, University of California at Berkeley, Department of Agricultural and Resource Economics and Policy.
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Cited by:
  1. Gersbach, Hans & Hummel, Noemi, 2011. "Climate Policy and Developing Countries," CEPR Discussion Papers 8685, C.E.P.R. Discussion Papers.

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