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International Trade in Oil, Gas and Carbon Emission Rights: An Intertemporal General Equilibrium Model

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  • Alan S. Manne
  • Thomas F. Rutherford

Abstract

This paper employs a five-region intertemporal model to examine three issues related to carbon emission restrictions. First, we investigate the possible impact of such limits upon future oil prices. We show that carbon limits are likely to differ in their near- and long-term impact. Second, we analyze the problem of "leakage" which could arise if the OECD countries were to adopt unilateral limits upon carbon emissions. Third, we quantify some of the gainsfrom trade in carbon emission rights. Each of these issues have been studied before, but to our knowledge this is the first study based on a multi-regional, forward-looking model. We show that sequential joint maximization can be an effective way to compute equilibria for intertemporal general equilibrium models of international trade.

Suggested Citation

  • Alan S. Manne & Thomas F. Rutherford, 1994. "International Trade in Oil, Gas and Carbon Emission Rights: An Intertemporal General Equilibrium Model," The Energy Journal, International Association for Energy Economics, vol. 0(Number 1), pages 57-76.
  • Handle: RePEc:aen:journl:1994v15-01-a04
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    Cited by:

    1. Berg, Elin & Kverndokk, Snorre & Rosendahl, Knut Einar, 1998. "Gains from cartelisation in the oil market," Energy Policy, Elsevier, vol. 26(9), pages 725-727, August.
    2. Springer, Urs, 2003. "International diversification of investments in climate change mitigation," Ecological Economics, Elsevier, vol. 46(1), pages 181-193, August.
    3. Stephen P. A. Brown, 1998. "Global warming policy: some economic implications," Economic and Financial Policy Review, Federal Reserve Bank of Dallas, issue Q IV, pages 26-35.
    4. Berg, Elin & Kverndokk, Snorre & Rosendahl, Knut Einar, 2002. "Oil Exploration under Climate Treaties," Journal of Environmental Economics and Management, Elsevier, vol. 44(3), pages 493-516, November.
    5. Hodjat Ghadhimi, 2009. "Sustainable Economic Development in Energy Rich Economies: A Regional Approach," Working Papers Working Paper 2009-05, Regional Research Institute, West Virginia University.
    6. repec:rri:wpaper:200802 is not listed on IDEAS
    7. repec:rri:wpaper:200905 is not listed on IDEAS
    8. Stephen P.A. Brown & Hillard G. Huntington, 1998. "Some implications of increased cooperation in world oil conservation," Economic and Financial Policy Review, Federal Reserve Bank of Dallas, issue Q II, pages 2-9.
    9. Boyd, Roy & Ibarraran, Maria E., 2002. "Costs of compliance with the Kyoto Protocol: a developing country perspective," Energy Economics, Elsevier, vol. 24(1), pages 21-39, January.
    10. Jaccard, Mark & Montgomery, W David, 1996. "Costs of reducing greenhouse gas emissions in the USA and Canada," Energy Policy, Elsevier, vol. 24(10-11), pages 889-898.
    11. Hodjat Ghadimi, 2008. "Energy in a Resource-based Regional Economy: A Dynamic General Equilibrium Analysis," Working Papers Working Paper 2008-02, Regional Research Institute, West Virginia University.
    12. Pang, Rui-zhi & Deng, Zhong-qi & Chiu, Yung-ho, 2015. "Pareto improvement through a reallocation of carbon emission quotas," Renewable and Sustainable Energy Reviews, Elsevier, vol. 50(C), pages 419-430.
    13. Liu, Xuemei, 2008. "The monetary compensation mechanism: An alternative to the clean development mechanism," Ecological Economics, Elsevier, vol. 66(2-3), pages 289-297, June.
    14. Lars Lindholt, 1999. "Beyond Kyoto: CO2 permit prices and the markets for fossil fuels," Discussion Papers 258, Statistics Norway, Research Department.
    15. Kram, Tom & Hill, Douglas, 1996. "A multinational model for CO2 reduction : Defining boundaries of future CO2 emissions in nine countries," Energy Policy, Elsevier, vol. 24(1), pages 39-51, January.

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    JEL classification:

    • F0 - International Economics - - General

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