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The Kyoto protocol: an economic and game theoretic interpretation

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  • CHANDER, Parkash

    (Indian Statistical Institute (ISI), New Delhi and CORE, Université Catholique de Louvain)

  • TULKENS, Henry

    ()
    (Center for Operations Research and Econometrics (CORE), Université catholique de Louvain (UCL), 1348 Louvain la Neuve, Belgium)

  • VAN YPERSELE, Jean - Pascal

    (Institut d'Astronomie et de Géophysique Georges Lemaître (ASTR), Université catholique de Louvain (UCL), 1348 Louvain la Neuve, Belgium)

  • WILLEMS, Stefane

    (Task Force Développement Durable (TFDD), Bureau fédéral du Plan, Brussels, Belgium)

Abstract

Calling upon both positive and normative economics, we attempt to characterize the issues at stake in the current international negotiations on climatic change. We begin (Section 2) by reviewing the main features of the Protocol. Then (Section 3), we identify by means of an elementary economic model the main concepts involved: optimality, non cooperation, coalitional stability. We observe (Section 4) that "business-as-usual", "no regrets" and other domestic policies are alternative ways to conceive of the non cooperative equilibrium prevailing before the negotiations. Which one should be retained ? Data suggest that the prevailing situation is a mixed one, exhibiting characteristics of several of these policies. We then turn (Section 5) to interpreting the Protocol. While there is no firm basis to assert that the emission quotas chosen at Kyoto correspond to optimal emissions (although they are a step in the right direction), economic and game theoretical arguments are put forward to support the view that for achieving these emission quotas, trading ensures efficiency, as well as coalitional stability for the agreement provided it is adopted at the largest scale i.e. worldwide. Finally, it is argued in Section 6 that beyond the Kyoto Protocol,the achievement of coalitionally stable optimality at the world level is a real possibility with trading, provided agreement can be reached in the future as to appropriate reference emission levels, in particular as far as developing countries are concerned.

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Bibliographic Info

Paper provided by Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) in its series CORE Discussion Papers with number 1999025.

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Date of creation: 01 Apr 1999
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Handle: RePEc:cor:louvco:1999025

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  1. CHANDER, Parkash & TULKENS, Henry, 1994. "A Core-Theoretic Solution for the Design of Cooperative Agreements on Transfrontier Pollution," CORE Discussion Papers 1994048, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  2. CHANDER, Parkash & TULKENS, Henry, 1995. "The Core of an Economy with Multilateral Environmental Externalities," CORE Discussion Papers 1995050, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  3. GERMAIN, Marc & TOINT, Philippe & TULKENS, Henry & DE ZEEUW, Aart, 1998. "Transfers to sustain core-theoretic cooperation in international stock pollutant control," CORE Discussion Papers 1998032, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  4. CHANDER, Parkash & TULKENS, Henry, . "Theoretical foundations of negotiations and cost sharing in transfrontier pollution problems," CORE Discussion Papers RP -983, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
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