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The Efficiency of Voluntary Pollution Abatement when Countries can Commit

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  • Boadway, Robin
  • Song, Zhen
  • Tremblay, Jean-François

Abstract

We characterize a mechanism for reducing pollution emissions in which countries, acting non-cooperatively, commit to match each others’ abatement levels and may subsequently engage in emissions quota trading. The mechanism leads to an efficient level of emissions, and if the matching abatements process includes a quota trading stage, the marginal benefits of emissions are also equalized across countries. Given equilibrium matching rates, the initial allocation of emission quotas (before trading) reflects each country’s marginal valuation for lower pollution relative to its marginal benefit from emissions. These results hold for any number of countries, in an environment where countries have different abatement technologies and different benefits from emissions, and even if the emissions of countries are imperfect substitutes in each country’s damage function. In a dynamic twoperiod setting, the mechanism achieves both intra-temporal and inter-temporal efficiency. We extend the model by assuming that countries are voluntarily contributing to an international public good, in addition to undertaking pollution abatements, and find that the level of emissions may be efficient even without any matching abatement commitments, and the marginal benefits of emissions may be equalized across countries even without quota trading.

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Bibliographic Info

Paper provided by Center for Research on Contemporary Economic Systems, Graduate School of Economics, Hitotsubashi University in its series CCES Discussion Paper Series with number 28.

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Length: 40 p.
Date of creation: Mar 2010
Date of revision:
Handle: RePEc:hit:ccesdp:28

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Keywords: Voluntary pollution abatement; matching commitments; emissions quota trading;

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References

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  1. Shilony, Yuval, 2000. "Diversity and ingenuity in voluntary collective action," European Journal of Political Economy, Elsevier, vol. 16(3), pages 429-443, September.
  2. Danziger, Leif & Schnytzer, Adi, 1991. "Implementing the Lindahl voluntary-exchange mechanism," European Journal of Political Economy, Elsevier, vol. 7(1), pages 55-64, April.
  3. Yukihiro Nishimura, 2008. "A Lindahl Solution to International Emissions Trading," Working Papers 1177, Queen's University, Department of Economics.
  4. Hans Gersbach & Ralph Winkler, 2007. "On the Design of Global Refunding and Climate Change," CER-ETH Economics working paper series 07/69, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich, revised Jul 2007.
  5. Boadway, Robin & Song, Zhen & Tremblay, Jean-Francois, 2007. "Commitment and matching contributions to public goods," Journal of Public Economics, Elsevier, vol. 91(9), pages 1664-1683, September.
  6. Varian, Hal R., 1994. "Sequential contributions to public goods," Journal of Public Economics, Elsevier, vol. 53(2), pages 165-186, February.
  7. Guttman, Joel M, 1978. "Understanding Collective Action: Matching Behavior," American Economic Review, American Economic Association, vol. 68(2), pages 251-55, May.
  8. Roberts, Marc J. & Spence, Michael, 1976. "Effluent charges and licenses under uncertainty," Journal of Public Economics, Elsevier, vol. 5(3-4), pages 193-208.
  9. Martin Altemeyer-Bartscher & Dirk T. G. Rübbelke & Eytan Sheshinski, 2010. "Environmental Protection and the Private Provision of International Public Goods," Economica, London School of Economics and Political Science, vol. 77(308), pages 775-784, October.
  10. Anke Gerber & Philipp C. Wichardt, 2008. "Providing Public Goods in the Absence of Strong Institutions," IEW - Working Papers 303, Institute for Empirical Research in Economics - University of Zurich.
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Cited by:
  1. Boadway, Robin & Song, Zhen & Tremblay, Jean-François, 2013. "Non-cooperative pollution control in an inter-jurisdictional setting," Regional Science and Urban Economics, Elsevier, vol. 43(5), pages 783-796.
  2. Guttman, Joel M., 2013. "On the evolution of conditional cooperation," European Journal of Political Economy, Elsevier, vol. 30(C), pages 15-34.
  3. Wolfgang Buchholz & Richard Cornes & Dirk Rübbelke, 2012. "Potentially Harmful International Cooperation on Global Public Good Provision," ANU Working Papers in Economics and Econometrics 2012-584, Australian National University, College of Business and Economics, School of Economics.
  4. Buchholz, Wolfgang & Cornes, Richard & Rübbelke, Dirk, 2011. "Interior matching equilibria in a public good economy: An aggregative game approach," Journal of Public Economics, Elsevier, vol. 95(7), pages 639-645.
  5. Olivier Bos & Béatrice Roussillon & Paul Schweinzer, 2013. "Agreeing on Efficient Emissions Reduction," CESifo Working Paper Series 4345, CESifo Group Munich.
  6. Martin Altemeyer-Bartscher & Anil Markandya & Dirk T.G. Rübbelke, 2011. "The Private Provision of International Impure Public Goods: the Case of Climate Policy," Working Papers 2011-09, BC3.

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