The Economic and Environmental Implications of the US Repudiation of the Kyoto Protocol and the Subsequent Deals in Bonn and Marrakech
AbstractTaking account of sinks credits as agreed in Bonn and Marrakech, this paper illustrates how market power could be exerted in the absence of the US ratification under Annex 1 trading and explores the potential implications of non-competitive supply behavior for the international market of tradable permits, compliance costs for the remaining Annex 1 countries to meet their revised Kyoto targets, and the environmental effectiveness. Our results show that the US withdrawal from the Kyoto Protocol has great impact on the economic costs and environmental effectiveness of the Protocol since it would lead to no real emission reduction in all remaining Annex 1 regions. Depending on how market power is exerted by the dominant permit suppliers, the former Soviet Union and the Eastern European countries, the overall compliance costs of all remaining Annex 1 regions differ significantly. Moreover, curtailing permit supply by market power increases substantially the overall environmental effectiveness by cutting the amount of hot air being emitted into the atmosphere by more than half, although to much less extent than in the case of the US compliance. --
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Bibliographic InfoPaper provided by ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research in its series ZEW Discussion Papers with number 02-28.
Date of creation: 2002
Date of revision:
climate policy; emission trading; market power; Kyoto Protocol;
Other versions of this item:
- Andreas Löschel & Zhong Zhang, 2002. "The economic and environmental implications of the US repudiation of the kyoto protocol and the subsequent deals in Bonn and Marrakech," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 138(4), pages 711-746, December.
- Q25 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Water
- Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy
- D43 - Microeconomics - - Market Structure and Pricing - - - Oligopoly and Other Forms of Market Imperfection
- Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy
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