The Efficiency, Equity and Politics of Emission Permit Trading
AbstractThis paper illustrates that an international permit trading system may hurt relatively poor countries by making associated economic activities unaffordable. A model is constructed in which the free market solution is Pareto inefficient as a result of pollution. The introduction of tradable permits allows pollution to be internalised, and brings about an increase in the total social surplus. But when incomes vary, this may not lead to a Pareto improvement; those in poor countries stop the polluting activity because they cannot afford to do otherwise.
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Bibliographic InfoPaper provided by University of Warwick, Department of Economics in its series The Warwick Economics Research Paper Series (TWERPS) with number 586.
Length: 23 pages
Date of creation: 2001
Date of revision:
TRADE ; EFFICIENCY ; POVERTY ; POLLUTION;
Find related papers by JEL classification:
- F18 - International Economics - - Trade - - - Trade and Environment
- D62 - Microeconomics - - Welfare Economics - - - Externalities
- D45 - Microeconomics - - Market Structure and Pricing - - - Rationing; Licensing
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