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Market power in international emissions trading : the impact of U.S. withdrawal from the Kyoto Protocol

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Author Info

  • Böhringer, Christoph
  • Löschel, Andreas

Abstract

This paper investigates the implications of U.S. withdrawal on environmental effectiveness, economic efficiency, and the distribution of compliance costs taking into account market power of the Former Soviet Union (FSU) on emission permit markets. While exercise of market power on behalf of FSU under U.S. compliance has no environmental impact as compared to competitive permit trade, it prevents the Kyoto Protocol from boiling down to business-as-usual after U.S. withdrawal. Non-compliance of the U.S. increases the efficiency losses from FSU market power and reduces the compliance costs of remaining OECD countries but these gains must be weighted against a dramatic loss in overall environmental effectiveness. Clearly, the big losers from U.S. withdrawal are FSU and its competitive fringe (Central and Eastern Europe) that suffer from a huge decline in permit sales revenues. --

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Bibliographic Info

Paper provided by ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research in its series ZEW Discussion Papers with number 01-58.

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Date of creation: 2001
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Handle: RePEc:zbw:zewdip:5414

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Related research

Keywords: climate policy; emission trading; market power;

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References

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  1. Eftichios Sartzetakis, 1997. "Tradeable emission permits regulations in the presence of imperfectly competitive product markets: Welfare implications," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 9(1), pages 65-81, January.
  2. Misiolek, Walter S. & Elder, Harold W., 1989. "Exclusionary manipulation of markets for pollution rights," Journal of Environmental Economics and Management, Elsevier, vol. 16(2), pages 156-166, March.
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Citations

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Cited by:
  1. 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.
  2. Böhringer, Christoph & Löschel, Andreas, 2002. "Climate policy induced investments in developing countries: the implications of investment risks," ZEW Discussion Papers 02-68, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  3. Klepper, Gernot & Peterson, Sonja, 2005. "Trading hot-air : the influence of permit allocation rules, market power and the US withdrawal from the Kyoto Protocol," Open Access Publications from Kiel Institute for the World Economy 3718, Kiel Institute for the World Economy (IfW).
  4. repec:hal:wpaper:hal-00866433 is not listed on IDEAS
  5. Carlo Carraro & Barbara Buchner, 2006. "US, China and the economics of climate negotiations," Working Papers 2006_07, Department of Economics, University of Venice "Ca' Foscari".
  6. Gernot Klepper & Sonja Peterson, 2004. "Marginal Abatement Cost Curves in General Equilibrium: The Influence of World Energy Prices," Working Papers 2004.136, Fondazione Eni Enrico Mattei.
  7. repec:hal:ciredw:hal-00866433 is not listed on IDEAS
  8. 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.
  9. Julien Chevallier, 2009. "Intertemporal Emissions Trading and Market Power: A Dominant Firm with Competitive Fringe Model," Working Papers halshs-00388207, HAL.
  10. FitzGerald, John & Bergin, Adele & Conefrey, Thomas & Diffney, Sean & Duffy, David & Kearney, Ide & Lyons, Sean & Malaguzzi Valeri, Laura & Mayor, Karen & Richard S. J. Tol, 2008. "Medium-Term Review 2008-2015, No. 11," Forecasting Report, Economic and Social Research Institute (ESRI), number MTR11.
  11. Larson, Donald F. & Ambrosi, Philippe & Dinar, Ariel & Rahman, Shaikh Mahfuzur & Entler, Rebecca, 2008. "Carbon markets, institutions, policies, and research," Policy Research Working Paper Series 4761, The World Bank.
  12. Marzio Galeotti & Carlo Carraro, 2004. "Does Endogenous Technical Change Make a Difference in Climate Policy Analysis? A Robustness Exercise with the FEEM-RICE Model," Working Papers 2004.152, Fondazione Eni Enrico Mattei.
  13. Sanderson, Todd & Ancev, Tihomir & Betz, Regina, 2008. "Optimal Coverage of Installations in a Carbon Emissions Trading Scheme (ETS)," 2008 Conference (52nd), February 5-8, 2008, Canberra, Australia 6047, Australian Agricultural and Resource Economics Society.
  14. Gernot Klepper & Sonja Peterson, 2003. "On the Robustness of Marginal Abatement Cost Curves: The Influence of World Energy Prices," Kiel Working Papers 1138, Kiel Institute for the World Economy.
  15. Lopez, Ramon E., 2009. "World Economic Crises in Times of Environmental Scarcity and Wealth Concentration," Working Papers 56408, University of Maryland, Department of Agricultural and Resource Economics.
  16. Klepper, Gernot & Peterson, Sonja, 2002. "US participation, permit allocation, and hot air supply," Open Access Publications from Kiel Institute for the World Economy 4237, Kiel Institute for the World Economy (IfW).

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