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International Emission Permit Markets with Refunding

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Author Info
Hans Gersbach () (CER-ETH - Center of Economic Research at ETH Zurich, Switzerland)
Ralph Winkler () (CER-ETH - Center of Economic Research at ETH Zurich, Switzerland)

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Abstract

We propose a blueprint for an international emission permit market such as the EU trading scheme. Each country decides on the amount of permits it wants to offer. A fraction of these permits is grandfathered, the remainder is auctioned. Revenues from the auction are collected in a global fund and reimbursed to member countries in fixed proportions. We show that international permit markets with refunding lead to outcomes in which all countries tighten the issuance of permits and are better off compared to standard international permit markets. If the share of grandfathered permits is sufficiently small, we obtain approximately socially optimal emission reductions.

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Publisher Info
Paper provided by CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich in its series CER-ETH Economics working paper series with number 08/97.

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Length: 32 pages
Date of creation: Oct 2008
Date of revision:
Handle: RePEc:eth:wpswif:08-07

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Related research
Keywords: climate change mitigation; global refunding scheme; international permit markets; international agreements; tradeable permits;

Other versions of this item:

Find related papers by JEL classification:
H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters
H41 - Public Economics - - Publicly Provided Goods - - - Public Goods

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Gersbach, Hans & Winkler, Ralph, 2007. "On the Design of Global Refunding and Climate Change," CEPR Discussion Papers 6379, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
    Other versions:
  2. Requate, Till, 2005. "Dynamic incentives by environmental policy instruments--a survey," Ecological Economics, Elsevier, vol. 54(2-3), pages 175-195, August. [Downloadable!] (restricted)
  3. Arthur J. Caplan & Richard C. Cornes & Emilson C. D. Silva, 2003. "An ideal Kyoto protocol: emissions trading, redistributive transfers and global participation," Oxford Economic Papers, Oxford University Press, vol. 55(2), pages 216-234, April.
  4. Löschel, Andreas & Lange, Andreas & Hoffmann, Tim & Böhringer, Christoph & Moslener, Ulf, 2004. "Assessing Emission Allocation in Europe : An Interactive Simulation Approach," ZEW Discussion Papers 04-40, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research. [Downloadable!]
  5. Montgomery, W. David, 1972. "Markets in licenses and efficient pollution control programs," Journal of Economic Theory, Elsevier, vol. 5(3), pages 395-418, December. [Downloadable!] (restricted)
  6. Jared C. Carbone & Carsten Helm & Thomas F. Rutherford, 2008. "The Case for International Emission Trade in the Absence of Cooperative Climate Policy," Darmstadt Discussion Papers in Economics 194, Institut für Volkswirtschaftslehre (Department of Economics), Technische Universität Darmstadt (Darmstadt University of Technology). [Downloadable!]
  7. Christoph Böhringer & Carsten Vogt, 2003. "Economic and environmental impacts of the Kyoto Protocol," Canadian Journal of Economics, Canadian Economics Association, vol. 36(2), pages 475-496, May. [Downloadable!] (restricted)
  8. Falk Ita & Mendelsohn Robert, 1993. "The Economics of Controlling Stock Pollutants: An Efficient Strategy for Greenhouse Gases," Journal of Environmental Economics and Management, Elsevier, vol. 25(1), pages 76-88, July. [Downloadable!] (restricted)
  9. Stavins, Robert & Barrett, Scott & Aldy, Joseph, 2003. "13 + 1: A Comparison of Global Climate Change Policy Architectures," Discussion Papers dp-03-26, Resources For the Future. [Downloadable!]
  10. Warwick J. McKibbin & Peter J. Wilcoxen, 2002. "The Role of Economics in Climate Change Policy," Journal of Economic Perspectives, American Economic Association, vol. 16(2), pages 107-129, Spring. [Downloadable!] (restricted)
  11. Helm, Carsten, 2003. "International emissions trading with endogenous allowance choices," Journal of Public Economics, Elsevier, vol. 87(12), pages 2737-2747, December. [Downloadable!] (restricted)
  12. Ian A. MacKenzie,, 2008. "On the Sequential Choice of Tradable Permit Allocations," CER-ETH Economics working paper series 08/83, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich. [Downloadable!]
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