Hot Air as an Implicit Side Payment Arrangement: Could a Hot Air Provision have Saved the Kyoto-Agreement?
AbstractThe purpose of this paper is to analyse whether the presence of Hot Air trading jeopardizes the environmental target of an international environmental agree-ment. We argue that Hot Air can be used as an implicit side-payment mecha-nism to actually bring about higher environmental protection compared to the situation without the trade option. We point to the existence of a fundamental trade-off between costs of compliance and the creation of dynamic incentives to develop cheaper reduction technologies. Implicit side-payments, in terms of Hot Air provision, may be needed in order to establish a compromise between these opposing demands. We identify the shortcomings and benefits of allowing fully flexible permit trading including the allocation rule of grandfathering.
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Bibliographic InfoPaper provided by University of Southern Denmark, Department of Environmental and Business Economics in its series Working Papers with number 42/03.
Length: 35 pages
Date of creation: Jul 2003
Date of revision:
Hot Air; Global GHG trade; Kyoto protocol; Grandfathering; Cost issue; EU; US;
Find related papers by JEL classification:
- Q28 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Government Policy
- H2 - Public Economics - - Taxation, Subsidies, and Revenue
- H4 - Public Economics - - Publicly Provided Goods
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