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Sectoral and Regional Expansion of Emissions Trading

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Author Info

  • Christoph Böhringer

    ()
    (Department of Economics, University of Oldenburg)

  • Dijkstra Bouwe

    ()
    (University of Nottingham)

  • Knut Einar Rosendahl

    ()
    (Research Department, Statistics Norway)

Abstract

We consider an international emissions trading scheme with partial sectoral and regional coverage. Sectoral and regional expansion of the trading scheme is beneficial in aggregate, but not necessarily for individual countries. We simulate international CO2 emission quota markets using marginal abatement cost functions and the Copenhagen 2020 climate policy targets for selected countries that strategically allocate emissions in a bid to manipulate the quota price. Quota exporters and importers generally have conflicting interests about admitting more countries to the trading coalition, and our results indicate that some countries may lose substantially when the coalition expands in terms of new countries. For a given coalition, expanding sectoral coverage makes most countries better off, but some countries (notably the USA and Russia) may lose out due to loss of strategic advantages. In general, exporters tend to have stronger strategic power than importers.

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Bibliographic Info

Paper provided by University of Oldenburg, Department of Economics in its series Working Papers with number V-337-11.

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Date of creation: Jun 2011
Date of revision: Jun 2011
Publication status: Published in Oldenburg Working Papers V-337-11
Handle: RePEc:old:dpaper:337-11

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Keywords: Emissions Trading; Allocation of Quotas; Strategic Behavior;

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References

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  1. Betz, Regina & Sanderson, Todd & Ancev, Tihomir, 2009. "In or Out: Efficient inclusion of installations in an Emissions Trading Scheme?," Research Reports, Australian National University, Environmental Economics Research Hub 94877, Australian National University, Environmental Economics Research Hub.
  2. Mustafa Babiker, John Reilly and Laurent Viguier, 2004. "Is International Emissions Trading Always Beneficial?," The Energy Journal, International Association for Energy Economics, International Association for Energy Economics, vol. 0(Number 2), pages 33-56.
  3. Johan Eyckmans & Denise Van Regemorter & Vincent van Steenberghe, 2001. "Is Kyoto fatally flawed? An analysis with MacGEM," Energy, Transport and Environment Working Papers Series, Katholieke Universiteit Leuven, Centrum voor Economische Studiën, Energy, Transport and Environment ete0118, Katholieke Universiteit Leuven, Centrum voor Economische Studiën, Energy, Transport and Environment.
  4. Helm, Carsten, 2003. "International emissions trading with endogenous allowance choices," Journal of Public Economics, Elsevier, Elsevier, vol. 87(12), pages 2737-2747, December.
  5. Eichner, Thomas & Pethig, Rüdiger, 2009. "Efficient CO2 emissions control with emissions taxes and international emissions trading," European Economic Review, Elsevier, Elsevier, vol. 53(6), pages 625-635, August.
  6. Christoph Böhringer & Henrike Koschel & Ulf Moslener, 2008. "Efficiency losses from overlapping regulation of EU carbon emissions," Journal of Regulatory Economics, Springer, Springer, vol. 33(3), pages 299-317, June.
  7. Böhringer, Christoph & Rosendahl, Knut Einar, 2009. "Strategic partitioning of emission allowances under the EU Emission Trading Scheme," Resource and Energy Economics, Elsevier, Elsevier, vol. 31(3), pages 182-197, August.
  8. David Malueg & Andrew Yates, 2009. "Bilateral Oligopoly, Private Information, and Pollution Permit Markets," Environmental & Resource Economics, European Association of Environmental and Resource Economists, European Association of Environmental and Resource Economists, vol. 43(4), pages 553-572, August.
  9. Holtsmark, Bjart & Sommervoll, Dag Einar, 2012. "International emissions trading: Good or bad?," Economics Letters, Elsevier, Elsevier, vol. 117(1), pages 362-364.
  10. Bouwe Dijkstra & Edward Manderson & Tae-Yeoun Lee, 2011. "Extending the Sectoral Coverage of an International Emission Trading Scheme," Environmental & Resource Economics, European Association of Environmental and Resource Economists, European Association of Environmental and Resource Economists, vol. 50(2), pages 243-266, October.
  11. Hege Westskog, 1996. "Market Power in a System of Tradeable CO2 Quotas," The Energy Journal, International Association for Energy Economics, International Association for Energy Economics, vol. 0(Number 3), pages 85-103.
  12. David Malueg & Andrew Yates, 2009. "Strategic Behavior, Private Information, and Decentralization in the European Union Emissions Trading System," Environmental & Resource Economics, European Association of Environmental and Resource Economists, European Association of Environmental and Resource Economists, vol. 43(3), pages 413-432, July.
  13. Maeda, Akira, 2003. "The Emergence of Market Power in Emission Rights Markets: The Role of Initial Permit Distribution," Journal of Regulatory Economics, Springer, Springer, vol. 24(3), pages 293-314, November.
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Cited by:
  1. Valeria Costantini & Alessio D'Amato & Chiara Martini & Maria Cristina Tommasino & Edilio Valentini & Mariangela Zoli, 2011. "Taxing international emissions trading," Departmental Working Papers of Economics - University 'Roma Tre' 0143, Department of Economics - University Roma Tre.

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