A Lindahl Solution to International Emissions Trading
AbstractWe 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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Bibliographic InfoPaper provided by Queen's University, Department of Economics in its series Working Papers with number 1177.
Length: 45 pages
Date of creation: Aug 2008
Date of revision:
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 Formulation 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
This paper has been announced in the following NEP Reports:
- NEP-ALL-2008-08-31 (All new papers)
- NEP-ENE-2008-08-31 (Energy Economics)
- NEP-ENV-2008-08-31 (Environmental Economics)
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