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Moral considerations in trading pollution permits

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Author Info

  • Eyckmans, Johan

    () (Hogeschool-Universiteit Brussel (HUB), Belgium, Katholieke Universiteit Leuven, Belgium)

  • Kverndokk, Snorre

    () (Ragnar Frisch Centre for Economic Research Oslo, Norway)

Abstract

In this paper we investigate how moral considerations, modelled as identity effects, affects an endogenous pollution permit trading equilibrium, in which governments choose in a non-cooperative way the amount of permits they allocate to their domestic industries. Politicians might feel reluctant to allow unlimited permit trading and/or may prefer that abatement is undertaken domestically due to ethical motivation. However, once governments have chosen permit allocations, firms trade these permits in an international competitive permit market without moral restraints. We show that governments’ moral concerns may actually increase global emissions but this result depends on the precise formulation of the identity function. Finally, we explore how exogenous technological change affects endogenous permit trading equilibria under identity considerations. We show that decreasing costs of abatement technologies may lead countries to overcome their reluctance to trading emission permits.

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File URL: http://lirias.hubrussel.be/handle/123456789/2226
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Bibliographic Info

Paper provided by Hogeschool-Universiteit Brussel, Faculteit Economie en Management in its series Working Papers with number 2008/12.

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Length: 31 pages
Date of creation: Feb 2008
Date of revision:
Publication status: published in Ecological Economics, Vol. 69(9), 2010, pp. 1814-1823
Handle: RePEc:hub:wpecon:200812

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Web page: http://research.hubrussel.be
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Related research

Keywords: Tradeable emission permits; noncooperative game theory; moral motivation; identity; technological change;

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References

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  1. George A. Akerlof & Rachel E. Kranton, 2005. "Identity and the Economics of Organizations," Journal of Economic Perspectives, American Economic Association, vol. 19(1), pages 9-32, Winter.
  2. Eyckmans, Johan & Proost, Stef & Schokkaert, Erik, 1993. "Efficiency and Distribution in Greenhouse Negotiations," Kyklos, Wiley Blackwell, vol. 46(3), pages 363-97.
  3. Michael Rauscher, 1997. "Voluntary Emission Reductions, Social Rewards, and Environmental Policy," Thuenen-Series of Applied Economic Theory 10, University of Rostock, Institute of Economics, Germany.
  4. Rolf Golombek & Michael Hoel, 2003. "Climate Policy under Technology Spillovers," Working Papers 2003.38, Fondazione Eni Enrico Mattei.
  5. Eyckmans, Johan & Hagem, Cathrine, 2008. "The European Union's potential for strategic emissions trading in a post-Kyoto climate agreement," Working Papers 2008/13, Hogeschool-Universiteit Brussel, Faculteit Economie en Management.
  6. Eyckmans, Johan & Schokkaert, Erik, 2003. "An 'ideal' normative theory for greenhouse negotiations," Open Access publications from Katholieke Universiteit Leuven urn:hdl:123456789/120240, Katholieke Universiteit Leuven.
  7. Tannenwald, Nina, 1999. "The Nuclear Taboo: The United States and the Normative Basis of Nuclear Non-Use," International Organization, Cambridge University Press, vol. 53(03), pages 433-468, June.
  8. Goodin, Robert E, 1994. "Selling Environmental Indulgences," Kyklos, Wiley Blackwell, vol. 47(4), pages 573-96.
  9. Montgomery, W. David, 1972. "Markets in licenses and efficient pollution control programs," Journal of Economic Theory, Elsevier, vol. 5(3), pages 395-418, December.
  10. Stavins Robert N., 1995. "Transaction Costs and Tradeable Permits," Journal of Environmental Economics and Management, Elsevier, vol. 29(2), pages 133-148, September.
  11. Helm, Carsten, 2003. "International emissions trading with endogenous allowance choices," Publications of Darmstadt Technical University, Institute of Economics (VWL) 33631, Darmstadt Technical University, Department of Business Administration, Economics and Law, Institute of Economics (VWL).
  12. Richard Schmalensee & Paul L. Joskow & A. Denny Ellerman & Juan Pablo Montero & Elizabeth M. Bailey, 1998. "An Interim Evaluation of Sulfur Dioxide Emissions Trading," Journal of Economic Perspectives, American Economic Association, vol. 12(3), pages 53-68, Summer.
  13. Kjell Arne Brekke & Snorre Kverndokk & Karinen Nyborg, 2000. "An Economic Model of Moral Motivation," Discussion Papers 290, Research Department of Statistics Norway.
  14. George A. Akerlof & Rachel E. Kranton, 2000. "Economics And Identity," The Quarterly Journal of Economics, MIT Press, vol. 115(3), pages 715-753, August.
  15. Hoel, Michael, 1991. "Global environmental problems: The effects of unilateral actions taken by one country," Journal of Environmental Economics and Management, Elsevier, vol. 20(1), pages 55-70, January.
  16. Nyborg, Karine & Rege, Mari, 2003. "On social norms: the evolution of considerate smoking behavior," Journal of Economic Behavior & Organization, Elsevier, vol. 52(3), pages 323-340, November.
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Cited by:
  1. Kverndokk, Snorre & Rose, Adam, 2008. "Equity and justice in global warming policy," MPRA Paper 24272, University Library of Munich, Germany.

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