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A Lindahl Solution to International Emissions Trading

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Author Info
Yukihiro Nishimura () (Yokohama National University and Queen's University)
Abstract

We consider international negotiations on the level of global pollution, and examine the Lindahl solution which determines the distribution of the pollution permits with unanimous agreement. We show various properties to clarify difficulties to achieve a Pareto efficient allocation as an agreement. The Lindahl solution may result in an unfair allocation, and it does not belong to the $\gamma$-core as in other solutions based on emissions trading. On the other hand, we provide mechanisms that implement the Lindahl solution as the subgame-perfect equilibrium. We also consider the market with region-specific prices as a device to induce second-best Pareto efficient allocations.

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File URL: http://www.econ.queensu.ca/working_papers/papers/qed_wp_1177.pdf
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File Function: First version 2008
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Publisher Info
Paper provided by Queen's University, Department of Economics in its series Working Papers with number 1177.

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Length: 45 pages
Date of creation: Aug 2008
Date of revision:
Handle: RePEc:qed:wpaper:1177

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Related research
Keywords: International emissions trading; Global externality; Lindahl equilibrium; Efficiency; Equity; Core; Implementability; Second-best analysis;

Find related papers by JEL classification:
Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters
D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
D62 - Microeconomics - - Welfare Economics - - - Externalities
D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
D78 - Microeconomics - - Analysis of Collective Decision-Making - - - Positive Analysis of Policy-Making and Implementation
H87 - Public Economics - - Miscellaneous Issues - - - International Fiscal Issues; International Public Goods
Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

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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. Guttman, Joel M, 1978. "Understanding Collective Action: Matching Behavior," American Economic Review, American Economic Association, vol. 68(2), pages 251-55, May. [Downloadable!] (restricted)
  2. Moore, John & Repullo, Rafael, 1988. "Subgame Perfect Implementation," Econometrica, Econometric Society, vol. 56(5), pages 1191-1220, September. [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. Danziger, Leif & Schnytzer, Adi, 1991. "Implementing the Lindahl voluntary-exchange mechanism," European Journal of Political Economy, Elsevier, vol. 7(1), pages 55-64, April. [Downloadable!] (restricted)
  5. Tian Guoqiang, 1994. "Implementation of Linear Cost Share Equilibrium Allocations," Journal of Economic Theory, Elsevier, vol. 64(2), pages 568-584, December. [Downloadable!] (restricted)
  6. Helm, Carsten, 2003. "International emissions trading with endogenous allowance choices," Journal of Public Economics, Elsevier, vol. 87(12), pages 2737-2747, December. [Downloadable!] (restricted)
  7. Tadenuma, Koichi, 2005. "Possibility and Optimality of Agreements in International Negotiations on Climate Change," Discussion Papers 2004-13, Graduate School of Economics, Hitotsubashi University. [Downloadable!]
  8. Shiell, Leslie, 2003. "Equity and efficiency in international markets for pollution permits," Journal of Environmental Economics and Management, Elsevier, vol. 46(1), pages 38-51, July. [Downloadable!] (restricted)
  9. Roemer, J.E., 1988. "On Public Ownership," Papers 317, California Davis - Institute of Governmental Affairs.
  10. Marc Fleurbaey & François Maniquet, 2006. "Compensation and responsibility," Working Papers halshs-00121367_v1, HAL. [Downloadable!]
  11. Chander, Parkash & Tulkens, Henry, 1994. "The Core of an Economy With Multilateral Environmental Externalities," Working Papers 886, California Institute of Technology, Division of the Humanities and Social Sciences. [Downloadable!]
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  12. Eyckmans, Johan, 1997. "Nash Implementation of a Proportional Solution to International Pollution Control Problems," Journal of Environmental Economics and Management, Elsevier, vol. 33(3), pages 314-330, July. [Downloadable!] (restricted)
  13. Foley, Duncan K, 1970. "Lindahl's Solution and the Core of an Economy with Public Goods," Econometrica, Econometric Society, vol. 38(1), pages 66-72, January. [Downloadable!] (restricted)
  14. John Duggan & Joanne Roberts, 2002. "Implementing the Efficient Allocation of Pollution," American Economic Review, American Economic Association, vol. 92(4), pages 1070-1078, September. [Downloadable!]
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  15. Arthur Caplan & Emilson Silva, 2007. "An equitable, efficient and implementable scheme to control global carbon dioxide emissions," International Tax and Public Finance, Springer, vol. 14(3), pages 263-279, June. [Downloadable!] (restricted)
    Other versions:
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