This paper analyses trading and banking of carbon emission rights. Within the framework of a modestly simple, integrated assessment model that brakes the world economy in just two re-gions, North and South, it can be shown: (1) There exists separability between environmental targets and the choice of instruments. Increasing the "when and where" flexibility in green-house gas abatement either through banking or trading of carbon emission permits or both positively affects global welfare. It has, however, almost no impact on global climate change. (2) Depending upon the choice of instruments there are significant distributional effects across regions. Both regions can improve welfare simultaneously, if carbon emission rights are traded on open international markets. But if it were feasible to bank or borrow carbon permits, then - independent of whether there is trading of carbon rights or not - the South suffers welfare losses compared to a no banking no trade situation.
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Paper provided by Universitaet Bern, Departement Volkswirtschaft in its series Diskussionsschriften with number
dp9906.
Find related papers by JEL classification: Q4 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy F2 - International Economics - - International Factor Movements and International Business
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