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The Economic and Environmental Implications of the US Repudiation of the Kyoto Protocol and the Subsequent Deals in Bonn and Marrakech

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Author Info
Zhang, ZhongXiang
Löschel, Andreas

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Abstract

Taking 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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Paper provided by ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research in its series ZEW Discussion Papers with number 02-28.

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Date of creation: 2002
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Handle: RePEc:zbw:zewdip:869

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Related research
Keywords: climate policy; emission trading; market power; Kyoto Protocol;

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Find related papers by JEL classification:
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

References listed on IDEAS
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  1. Johan Eyckmans & Denise Van Regemorter & Vincent van Steenberghe, 2001. "Is Kyoto fatally flawed? An analysis with MacGEM," Energy, Transport and Environment Working Papers Series ete0118, Katholieke Universiteit Leuven, Centrum voor Economische Studiën, Energy, Transport and Environment. [Downloadable!]
  2. 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. 20(Special I), pages 221-256.
  3. Hahn, Robert W, 1984. "Market Power and Transferable Property Rights," The Quarterly Journal of Economics, MIT Press, vol. 99(4), pages 753-65, November. [Downloadable!] (restricted)
    Other versions:
  4. 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. [Downloadable!] (restricted)
  5. Zhang, ZhongXiang, 1998. "Greenhouse gas emissions trading and the world trading system," MPRA Paper 12971, University Library of Munich, Germany. [Downloadable!]
  6. ZhongXiang Zhang, 2000. "Estimating the size of the potential market for the Kyoto flexibility mechanisms," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 136(3), pages 491-521, 09. [Downloadable!] (restricted)
    Other versions:
  7. Malueg, David A., 1990. "Welfare consequences of emission credit trading programs," Journal of Environmental Economics and Management, Elsevier, vol. 18(1), pages 66-77, January. [Downloadable!] (restricted)
  8. Alan S. Manne & Richard G. Richels, 1999. "The Kyoto Protocol: A Cost-Effective Strategy for Meeting Environmental Objectives?," The Energy Journal, International Association for Energy Economics, vol. 20(Special I), pages 1-24.
  9. 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. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Rose, Adam & Peterson, Thomas D. & Zhang, ZhongXiang, 2006. "Regional carbon dioxide permit trading in the United States: coalition choices for Pennsylvania," MPRA Paper 13547, University Library of Munich, Germany. [Downloadable!]
  2. Dirk T.G. Rübbelke & Andreas Löschel, 2005. "Impure Public Goods and Technological Interdependencies," Working Papers 2005.60, Fondazione Eni Enrico Mattei. [Downloadable!]
    Other versions:
  3. Warwick McKibbin & Peter Wilcoxen, 2008. "Building On Kyoto: Towards A Realistic Global Climate Agreement," CAMA Working Papers 2008-13, Australian National University, Centre for Applied Macroeconomic Analysis. [Downloadable!]
  4. Gernot Klepper & Sonja Peterson, 2002. "Trading Hot Air The Influence of Permit Allocation Rules, Market Power and the US Withdrawal from the Kyoto Protocol," Kiel Working Papers 1133, Kiel Institute for the World Economy. [Downloadable!]
  5. Warwick J. McKibbin & Peter J. Wilcoxen, 2003. "Climate Policy and Uncertainty: The Roles of Adaptation versus Mitigation," Economics and Environment Network Working Papers 0306, Australian National University, Economics and Environment Network. [Downloadable!]
  6. Warwick J. McKibbin, 2004. "Climate Change Policy for India," ASARC Working Papers 2004-03, Australian National University, Australia South Asia Research Centre. [Downloadable!]
  7. Warwick J. McKibbin & Peter J Wilcoxen, 2003. "Estimates of the Costs of Kyoto-Marrakesh Versus The McKibbin-Wilcoxen Blueprint," Departmental Working Papers 2003-14, Australian National University, Economics RSPAS. [Downloadable!]
    Other versions:
  8. Gernot Klepper & Sonja Peterson, 2005. "Trading Hot-Air. The Influence of Permit Allocation Rules, Market Power and the US Withdrawal from the Kyoto Protocol," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 32(2), pages 205-228, October. [Downloadable!] (restricted)
  9. Zhang, ZhongXiang, 2003. "Why Has China not Embraced a Global Cap-and-Trade Regime?," MPRA Paper 12783, University Library of Munich, Germany, revised Jul 2007. [Downloadable!]
  10. Zhang, ZhongXiang, 2004. "The World Bank's prototype carbon fund and China," MPRA Paper 13222, University Library of Munich, Germany, revised Dec 2005. [Downloadable!]
    Other versions:
  11. Donald Larson & Gunnar Breustedt, 2009. "Will Markets Direct Investments Under the Kyoto Protocol? Lessons from the Activities Implemented Jointly Pilots," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 43(3), pages 433-456, July. [Downloadable!] (restricted)
  12. Zhang, ZhongXiang, 2003. "Reconstructing climate policy: how best to engage China and other developing countries?," MPRA Paper 12830, University Library of Munich, Germany. [Downloadable!]
  13. 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. [Downloadable!]
  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. [Downloadable!]
  15. Christoph BÖhringer & Andreas LÖschel, 2003. "Market power and hot air in international emissions trading: the impacts of US withdrawal from the Kyoto Protocol," Applied Economics, Taylor and Francis Journals, vol. 35(6), pages 651-663, January. [Downloadable!] (restricted)
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