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The Effect of Local and Global Pollution Mandates on a Nonrenewable Resource

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Author Info

  • Amigues, Jean-Pierre

    ()
    (Toulouse School of Economics)

  • Chakravorty, Ujjayant

    ()
    (University of Alberta, Department of Economics)

  • Moreaux, Michel

    ()
    (Toulouse School of Economics)

Abstract

Many regions such as the European Union and states in the U.S. have introduced mandates aimed at restricting carbon emissions. On the other hand, the stated goal of the Intergovernmental Panel on Climate Change (IPCC) which provides the science behind the current global climate negotiations is to stabilize the atmospheric stock of carbon. How do these multiple pollution control efforts interact when the same nonrenewable resource (e.g., coal) creates the externality? In this paper we show that environmental mandates that aim to reduce emissions and those aiming to limit the stock of pollution, may not compliment each other. For example, a stricter emissions mandate may actually increase the global pollution stock and hasten the date when the global pollution mandate becomes binding. A stricter local mandate will lead to the global mandate binding for a longer time period and a delay in the eventual transition to a clean substitute.

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Bibliographic Info

Paper provided by University of Alberta, Department of Economics in its series Working Papers with number 2010-2.

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Length: 40 pages
Date of creation: 01 Jan 2010
Date of revision: 01 Oct 2010
Handle: RePEc:ris:albaec:2010_002

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Keywords: dynamics; environmental regulation; externalities; resource allocation; energy markets;

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  1. Chakravorty, Ujjayant & Magné, Bertrand & Moreaux, Michel, 2005. "A Hotelling Model with a Ceiling on the Stock of Pollution," IDEI Working Papers 368, Institut d'Économie Industrielle (IDEI), Toulouse.
  2. Arthur Caplan & Emilson Silva, 2002. "An Efficient Mechanism to Control Correlated Externalities: Redistributive Transfers and the Coexistence of Regional and Global Pollution Permit Markets," Working Papers 2002-23, Utah State University, Department of Economics.
  3. Amigues, J-P & Favard, P & Gaudet, G & Moreaux, M, 1996. "On the Optimal Order of Natural Resource Use When the Capacity of the Inexhaustible Substitute is Limited," Cahiers de recherche 9628, Universite de Montreal, Departement de sciences economiques.
  4. Smulders, J.A. & Werf, E.H. van der, 2005. "Climate Policy and the Optimal Extraction of High- and Low-Carbon Fossil Fuels," Discussion Paper 2005-119, Tilburg University, Center for Economic Research.
  5. List, John A. & Mason, Charles F., 2001. "Optimal Institutional Arrangements for Transboundary Pollutants in a Second-Best World: Evidence from a Differential Game with Asymmetric Players," Journal of Environmental Economics and Management, Elsevier, vol. 42(3), pages 277-296, November.
  6. Jeffrey A. Frankel, 2009. "An Elaborated Global Climate Policy Architecture: Specific Formulas and Emission Targets for All Countries in All Decades," NBER Working Papers 14876, National Bureau of Economic Research, Inc.
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