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Trading hot-air : the influence of permit allocation rules, market power and the US withdrawal from the Kyoto Protocol

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  • Klepper, Gernot
  • Peterson, Sonja

Abstract

After the conferences in Bonn and Marrakech it is likely that international emissions trading will be realized in the near future. Major influences on the permit market are the institutional detail, the participation structure and the treatment of hot-air. Different scenarios do not only differ in their implications for the demand and supply of permits and thus the permit price, but also in their allocative effects. In this paper we discuss likely institutional designs for permit allocation in the hot-air economies and the use of market power and quantify the resulting effects by using the computable general equilibrium model DART. It turns out that the amount of hot-air supplied will be small if hot-air economies cooperate in their decisions. Under welfare maximization more hot-air is supplied than in the case were governments try to maximize revenues from permit sales. --

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Bibliographic Info

Paper provided by Kiel Institute for the World Economy (IfW) in its series Open Access Publications from Kiel Institute for the World Economy with number 3718.

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Date of creation: 2005
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Handle: RePEc:zbw:ifwkie:3718

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Keywords: CGE Model ; DART ; Emission Trading ; Hot-Air ; Kyoto Protocol ; Market Power ; Permit Allocation;

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References

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  1. Paul M. Bernstein & W. David Montgomery & Thomas F. Rutherford & Gui-Fang Yang, 1999. "Effects of Restrictions on International Permit Trading: The MS-MRT Model," The Energy Journal, International Association for Energy Economics, vol. 0(Special I), pages 221-256.
  2. Zhang, ZhongXiang & Löschel, Andreas, 2002. "The Economic and Environmental Implications of the US Repudiation of the Kyoto Protocol and the Subsequent Deals in Bonn and Marrakech," ZEW Discussion Papers 02-28, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  3. Robert E. Hall & Charles I. Jones, 1999. "Why Do Some Countries Produce So Much More Output Per Worker Than Others?," The Quarterly Journal of Economics, MIT Press, vol. 114(1), pages 83-116, February.
  4. Springer, Katrin, 1998. "The DART general equilibrium model: A technical description," Kiel Working Papers 883, Kiel Institute for the World Economy.
  5. Gernot Klepper & Sonja Peterson & Katrin Springer, 2003. "DART97: A Description of the Multi-regional, Multi-sectoral Trade Model for the Analysis of Climate Policies," Kiel Working Papers 1149, Kiel Institute for the World Economy.
  6. Rutherford, Thomas F, 1999. "Applied General Equilibrium Modeling with MPSGE as a GAMS Subsystem: An Overview of the Modeling Framework and Syntax," Computational Economics, Society for Computational Economics, vol. 14(1-2), pages 1-46, October.
  7. Böhringer, Christoph, 2001. "Climate politics from Kyoto to Bonn: from little to nothing?!?," ZEW Discussion Papers 01-49, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  8. Warwick J. McKibbin & Peter J. Wilcoxen, 2000. "Beyond the Kyoto Protocol," Economics and Environment Network Working Papers 0002, Australian National University, Economics and Environment Network.
  9. Böhringer, Christoph & Löschel, Andreas, 2001. "Market power in international emissions trading : the impact of U.S. withdrawal from the Kyoto Protocol," ZEW Discussion Papers 01-58, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
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Citations

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Cited by:
  1. Chevallier, Julien, 2010. "Intertemporal Emissions Trading and Allocation Rules: Gainers, Losers and the Spectre of Market Power," Economics Papers from University Paris Dauphine 123456789/4600, Paris Dauphine University.
  2. Deke, Oliver & Peterson, Sonja, 2003. "Integrated climate modelling at the Kiel Institute for World Economics: The DART Model and its applications," Open Access Publications from Kiel Institute for the World Economy 4236, Kiel Institute for the World Economy (IfW).
  3. Gernot Klepper & Sonja Peterson, 2005. "Emissions Trading, CDM, JI, and More – The Climate Strategy of the EU," Working Papers 2005.55, Fondazione Eni Enrico Mattei.
  4. Julien Pierre Chevallier, 2007. "A differential game of intertemporal emissions trading with market power," EconomiX Working Papers 2007-18, University of Paris West - Nanterre la Défense, EconomiX.
  5. Stronzik, Marcus & Hunt, Alistair & Eckermann, Frauke & Taylor, Tim, 2003. "The Role of Transaction Costs and Risk Premia in the Determination of Climate Change Policy Responses," ZEW Discussion Papers 03-59, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  6. Huang, Wei Ming & Lee, Grace W.M. & Wu, Chih Cheng, 2008. "GHG emissions, GDP growth and the Kyoto Protocol: A revisit of Environmental Kuznets Curve hypothesis," Energy Policy, Elsevier, vol. 36(1), pages 239-247, January.
  7. Böhringer, Christoph & Moslener, Ulf & Sturm, Bodo, 2006. "Hot Air for Sale: A Quantitative Assessment of Russia's Near-Term Climate Policy Options," ZEW Discussion Papers 06-16, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  8. Jaehn, Florian & Letmathe, Peter, 2010. "The emissions trading paradox," European Journal of Operational Research, Elsevier, vol. 202(1), pages 248-254, April.
  9. Tsung-Chen Lee & Hsiao-Chi Chen & Shi-Miin Liu, 2013. "Optimal strategic regulations in international emissions trading under imperfect competition," Environmental Economics and Policy Studies, Society for Environmental Economics and Policy Studies - SEEPS, vol. 15(1), pages 39-57, January.
  10. Julien Chevallier, 2009. "Intertemporal Emissions Trading and Market Power: A Dominant Firm with Competitive Fringe Model," Working Papers halshs-00388207, HAL.
  11. Cathrine Hagem & Hege Westskog, 2009. "Allocating Tradable Permits on the Basis of Market Price to Achieve Cost Effectiveness," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 42(2), pages 139-149, February.
  12. Tsung-Chen Lee, 2011. "Endogenous market structures in non-cooperative international emissions trading," Mitigation and Adaptation Strategies for Global Change, Springer, vol. 16(6), pages 663-675, August.

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