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Internationally Coordinated Emission Permit Policies: An Option for Withdrawers from the Kyoto Protocol?

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  • Birgit Bednar-Friedl
  • Karl Farmer

Abstract

This paper investigates the welfare costs of unilateral versus internationally coordinated emission permit policies in a two-country overlapping generations model with producer carbon emissions. We show that, for a net foreign debtor country, the domestic welfare costs of a unilateral domestic permit policy are larger than of an internationally coordinated policy if the world economy is dynamically efficient. From the perspective of a net foreign debtor country that has withdrawn from the Kyoto Protocol, an internationally coordinated permit policy is dominated by climate political inaction also in the post-Kyoto era since bearing the costs of foreign actionism is cheaper, in terms of welfare, than agreeing on international policy coordination unless the world economy becomes dynamically inefficient.

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File URL: http://www.cesifo-group.de/portal/page/portal/DocBase_Content/WP/WP-CESifo_Working_Papers/wp-cesifo-2009/wp-cesifo-2009-08/cesifo1_wp2764.pdf
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Bibliographic Info

Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 2764.

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Date of creation: 2009
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Handle: RePEc:ces:ceswps:_2764

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Related research

Keywords: emission permit policies; trade; overlapping generations; welfare;

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  1. Torsten Persson, 1983. "Deficits and Intergenerational Welfare in Open Economies," NBER Working Papers 1083, National Bureau of Economic Research, Inc.
  2. Ghosh, Atish R., 1992. "Fiscal policy, the terms of trade, and the external balance," Journal of International Economics, Elsevier, Elsevier, vol. 33(1-2), pages 105-125, August.
  3. Maurice Obstfeld, 1988. "Fiscal Deficits and Relative Prices in a Growing World Economy," NBER Working Papers 2725, National Bureau of Economic Research, Inc.
  4. Karl Farmer & Birgit Bednar-Friedl & Andreas Rainer, 2008. "Effects of Unilateral Climate Policy on Terms of Trade, Capital Accumulation, and Welfare in a World Economy," CESifo Working Paper Series 2375, CESifo Group Munich.
  5. Frenkel, Jacob A & Razin, Assaf, 1986. "The International Transmission and Effects of Fiscal Policies," American Economic Review, American Economic Association, American Economic Association, vol. 76(2), pages 330-35, May.
  6. Weber, Christopher L. & Peters, Glen P., 2009. "Climate change policy and international trade: Policy considerations in the US," Energy Policy, Elsevier, Elsevier, vol. 37(2), pages 432-440, February.
  7. Lipton, David & Sachs, Jeffrey, 1983. "Accumulation and growth in a two-country model : A simulation approach," Journal of International Economics, Elsevier, Elsevier, vol. 15(1-2), pages 135-159, August.
  8. 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.
  9. Tetsuo Ono, 2002. "The Effects of Emission Permits on Growth and the Environment," Environmental & Resource Economics, European Association of Environmental and Resource Economists, European Association of Environmental and Resource Economists, vol. 21(1), pages 75-87, January.
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